Millions face mortgage rate rises

Those who deals end within the next year could see their monthly payments rise by an average of £192, a scenario nearly two-thirds of people claimed would cause them financial difficulties.

Financial Markets are no strangers to volatility, but the current wave has directly impacted mortgage rates. The anticipation of further interest rate rises has fuelled recent market volatility, directly influencing the dynamics and availability of mortgage products.

More than three million individuals in the UK potentially face a ‘remortgage nightmare’, warns a new survey[1].

The research found that around 40% of mortgage holders have not experienced an increase in their payments as interest rates have risen, primarily due to fixed rate deals.

MONTHLY REPAYMENTS INCREASED

However, one in five respondents reported that their monthly payments have increased by over £200 in the past year and a half. Further, 16% are already having difficulty making their mortgage payments, a figure that escalates to 21% for those aged 55 and above. Nearly half (48%) admitted they would struggle if their monthly repayments increased by even £150.

Those whose deals end within the next year could see their monthly payments rise by an average of £192, a scenario nearly two-thirds of people claimed would cause them financial difficulties. The Office for National Statistics estimates that approximately 1.3 million fixed deals will expire in 2023, most under 2%.

With the average two-year fixed mortgage costing around 5.5%, unless rates drop before people have to remortgage, this could result in a disaster for hundreds of thousands.

SIGNIFICANT PAYMENT INCREASES

Those with large mortgages will face the most significant payment increases, including those with higher incomes who bought pricier properties and younger people who purchased more recently at higher prices. This trend is already evident among 18 to 34-year-olds, with one in four reporting that their monthly repayment has increased by more than £200.

Market overreaction is still possible, and rates could fall back again. However, any substantial reduction in mortgage costs might necessitate a cut by the Bank of England, which is currently not expected until 2024.

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