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Rising mortgage rates could cost UK households nearly £9bn

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
12/06/2023

Climbing mortgage prices could cost UK households refixing onto new mortgages around £9bn, with the refixers in London and the South East hardest hit, research has suggested.

According to a report from the Centre for Economics and Business Research (CEBR), the two-year fixed rate is expected to rise to an average of 5.1% in 2023 and 4.6% in 2024.

The firm said that based on figures from the Office for National Statistics (ONS), which suggest that around 2.5 million are due to refix this year and one million are on variable rates, mortgage holders looking to renegotiate in the next two years could see their payments rise by around £8.7bn due to “tighter monetary policy”.

It estimated that around 28% of refixers will opt for a two-year deal and the rest will choose a five-year fixed rate.

This is broken down with the annual cost of mortgage for refixers could up by £3,900 in 2023 and £3,200 for 2024.

Biggest and smallest increases

The report said that those living in London would experience the largest increases for refixers with mortgage costs jumping by around £1.8bn.

This is broken down by the annual cost of a mortgage for refixers rising by £7,300 in 2023 and £5,900 in 2024.

This was followed by those refixing in the South East, which was estimated at around £1.7bn. CEBR projected that the annual increase in the annual cost for refixers would be £5,400 for 2023 and £4,400 for 2024.

Northern Ireland and the North East were at the other end of the scale, coming to £126m and £159m increase in mortgage costs respectively.

‘Substantial strain on incomes’

The report added: “Our estimates reveal a substantial strain on incomes across the UK that is yet to be fully felt. In other words, while the Bank’s tightening cycle might be nearing its end, the impact on households is only just beginning.

“With mortgages often occupying the most significant portion of household expenses, our estimates underscore the grim reality of rising rates, which will exert further strain on already stretched incomes, and hence the wider consumer economy well into 2024.”