Mortgage rate warning for over a MILLION Britons with bills to surge in just months

Andrew Bailey, Governor of the Bank of England announced an interest base rate hike
Yui Mok
Georgina Cutler

By Georgina Cutler


Published: 06/02/2023

- 12:12

Updated: 06/02/2023

- 14:14

More than a million households will see mortgage repayments go up

Mortgage-payers risk seeing a huge surge in their monthly payments with experts warning about the impact of the Bank of England’s decision to raise the UK’s base interest rate.

The interest hike aims to mitigate the impact of inflation which will affect 1.4 million homeowners with a fixed mortgage coming to an end.

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On a fixed rate, the interest rate remains the same for a period of time, usually two to five years.

Whereas homeowners on a variable rate mortgage will see the interest rate change depending on shifts in the base rate.

The base rate now stands at four per cent and while variable rate homeowners are expecting their payments to rise, those on a fixed rate could also be affected.

EMBARGOED TO 2230 WEDNESDAY FEBRUARY 1 File photo dated 12/09/18 of model houses on a pile of coins and bank notes. Homeowners could face mortgage hikes of up to 14,000 a year as they come off low fixed-rate deals, adding to the squeeze on living standards, Labour has said. Analysis by the party shows predicted annual increases in costs for a median house purchase at 80% mortgage in every constituency in the UK. Issue date: Wednesday February 1, 2023.
Homeowners on both variable and fixed rate contracts could be affected by the interest rate rise
Joe Giddens

If a fixed mortgage contract is coming to an end, the rate may need to be negotiated but it is unlikely that homeowners will get a lower rate due to the rise in interest rates being passed onto lenders.

The base rate is the interest that Bank of England charges other banks, building societies and lenders for borrowing money.

Alice Haine, a personal finance analyst at Bestinvest said: “While those locked into fixed-rate deals won’t see any difference in their monthly repayment, the 1.4 million homeowners with a fixed product expiring this year will face a jump in their monthly bill.

“This is because despite easing mortgage rates they will still move onto a significantly higher rate than they were paying before their deal started.

“Meanwhile, tracker and variable rates will increase as they are aligned to the Bank of England’s bank rate – so those with existing products should expect an instant hit while prospective buyers need to do the maths to decide which type of mortgage they want to take on.”

Despite soaring interest rates and inflation, mortgage rates have fallen following a spike in October 2022.

The bond market went into financial meltdown following the infamous mini-budget during the Liz Truss administration.

If the base rate goes up in line with expectations, fixed rate mortgage deals are unlikely to rise further as lenders have already priced it in.

File photo dated 09/07/21 of an aerial view of terrace houses in west London. More than 1.4 million households are facing the prospect of interest rate rises when they renew their fixed-rate mortgages this year, according to the Office for National Statistics (ONS). The majority of fixed-rate mortgages in the UK (57%) which are coming up for renewal in 2023 were fixed at interest rates below 2%, it said. Issue date: Monday January 9, 2023.
Experts have said there are some silver linings in the housing market
Victoria Jones

In addition, demand for properties has dropped so lenders will be competing to offer better-priced deals.

Haines added: “With interest rates still likely to rise again from here, tracker repayments may nudge up again in the short term. Taking advice from an independent mortgage broker will identify the best path for a borrower’s finances.

“The lucky ones in all of this are homeowners that locked in longer fixes in 2021, such as a two- or five-year product, before the rate hiking cycle began.

“They can relax for now but with property prices on the slide as demand eases off, it might be wise to overpay to protect against the downturn which can negatively impact a borrower’s loan-to-value band.

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