Mortgage rates: Britons warned of 'nasty shock' as repayment costs soar
Households are set to see mortgage rates triple as Britons are forced to refinance their homes
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Households are set to see mortgage rates triple as Britons are forced to refinance their homes this month.
Experts warn that the housing affordability crisis will peak between April and June when 371,000 loans are up for renewal at significantly higher interest rates.
These mortgages were secured before the Bank of England sharply increased rates in a bid to combat inflation.
According to the Office for National Statistics, most of them currently have rates below two per cent.
Experts warn that the housing affordability crisis will peak between April and June
PA
“People nearing the end of their fixed-rate deal are in for a nasty shock,” Myron Jobson, senior personal finance analyst at UK investment platform Interactive Investor told Bloomberg.
The average rate for a two-year fixed mortgage is currently 5.35 per cent, while a five-year is slightly cheaper at 4.74 per cent, according to price comparison site Uswitch.
Timur Kashaev saw his monthly mortgage payment surge by £800 in December, when his three-year loan with a 1.8 per cent fixed rate expired and he had to renew at 4.8 per cent.
The 41-year-old is now paying £2,200 a month for his two-bedroom apartment in Putney, London and has cancelled his travel plans to Israel and Greece.
“I’m not sure what other financial sacrifices I’ll have to make,” he said.
Similarly, Guilaine Le Joncour is facing an additional £440 in monthly costs after her two-year, 1.8 per cent fixed-rate mortgage is up for renewal.
The 43-year-old and her husband have negotiated a deal for October that will see their rate rise to 3.8 per cent, costing them a total of £2,340 monthly.
The surging borrowing costs have damaged demand for new loans, with UK mortgage approvals falling in January to the lowest level since 2009, excluding the first Covid lockdown when the property market was closed.
House prices are falling at the fastest rate since 2009 and homes are taking almost twice as long to sell as they did a year ago.
Surging borrowing costs have damaged demand for new loans, with UK mortgage approvals falling in January to the lowest level since 2009
PA
“Mortgage rates are high and house prices are falling, devaluing people’s properties while making it more expensive to keep them,” said Graham Cox, broker at UK-based Self Employed Mortgage Hub.
The International Monetary Fund ranked the UK at the bottom of its G-20 peers for economic output this year.
Rosita Janulion, mortgage expert at UK brokerage company Habito said borrowers are seeking different options to tackle rising mortgage costs including inquiring about interest-only deals, variable rates and longer terms.
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