1.4 million households face £250/month mortgage hike when deals expire in 2023
More than 1.4 million households will experience higher mortgage rates when they remortgage this year, with over 350,000 deals set to mature in the first quarter alone.
According to figures from the Office for National Statistics (ONS), 57% of fixed rate mortgages coming up for renewal in the UK were fixed at below 2%.
While interest rates have been increasing since the start of 2022, most fixed rate borrowers have been insulated from those increases, with the average new fixed rate mortgage standing at around 6%.
But, 353,000 fixed rate mortgages are due to be renewed in the first quarter of this year, rising to a peak 371,000 in the second quarter.
Meanwhile the ONS figures suggest a total 1.4 million face the prospect of interest rate rises when they renew their fixed rate mortgage in 2023.
Based on a £100,000 mortgage due for renewal this year with a rate hike from 2% to 6% (25-year capital and repayment mortgage), the monthly mortgage repayment on the same mortgage would increase by £220 (from £424 to £644).
However, assuming the same increase on a £300,000 mortgage, monthly repayments would rise by £661 (from £1,272 to £1,933).
The Office for Budget Responsibility’s expectations of the bank rate is set to peak at 4.8% at the end of 2023, with mortgagors on fixed rates set to expire by the end of this year facing monthly repayment increases of around £250 when switching to a new deal.
The research also found that around four in 10 of those with a mortgage are worried about changes in interest rates on their mortgage.
ONS revealed 1% of mortgagors said they were behind on mortgage payments and 7% of renters said they were behind on rent payments.
Rent on the up
ONS said over a quarter of renters surveyed at the end of last year had reported their rent payments had gone up in the last six months.
The report said private rental prices paid by tenants rose by 4% in the 12 months to November, which is up from 23.8% in the 12 months to October.
ONS noted that in the 12 months to March 2021, renters spent £106.50 per week on rent, equivalent to 24% of their monthly weekly expenditure.
Mortgage holders spent a total of £140.80 per week on mortgage repayments, or around 16% of their median weekly expenditure.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Housing costs are going through the roof and are set to become even more expensive for many Britons in the coming months.
“The climb in interest rates over the past year has marked the end of the golden era of cheap mortgages. Home loans have hit levels not seen since the financial crisis and the spectre of further hikes in the base rate is set to pile more misery on mortgage holders and wannabe homeowners alike at time when household budgets are reeling from the cost-of-living squeeze on finances.
“Higher rates will have an immediate impact on those with variable rate mortgages linked to the Bank of England base rate, while those approaching the end of their deal are in for a nasty shock when it’s time to remortgage.”