As the average cost of two-year fixed rate mortgages rises above 6% for the first time since last December, there are warnings that millions of homeowners will struggle to meet their monthly mortgage repayments. At the time of writing, Moneyfacts reports that the average five year fixed rate deal is now 5.57%, while the average two year deal is 6.01%.
This is still not nearing the peaks of 6.65% that were reached last year, following the panic sparked by Liz Truss’s surprise mini-budget. However, it is expected that the interest rate will soon be raised again by the Bank of England in an effort to control inflation, leading to fears that mortgage rates will continue to remain high for the foreseeable future.
The Guardian reports that according to UK Finance, the trade body that represents the finance industry, more than 2.4 million mortgage holders will see their cheap fixed rate deals expire by next year. This will amount to the average household having to find an extra £2,900 per year when they remortgage.
Simon Pittaway, Senior Economist at the Resolution Foundation, said: “Market expectations that interest rates are going to rise even higher, and stay higher for longer, are having a major effect on the mortgage market, with deals being pulled and replaced with new higher-rate mortgages.”
He added: “This means the mortgage crunch is now on track to increase mortgage bills by £15.8 billion, with those re-mortgaging next year set to see their costs rise by £2,900 on average.”
“Of course, market expectations can be wrong, and rate rises may not turn out to be as bad as feared. But with three-fifths of Britain’s £15.7 billion mortgage hike still to be passed on to households, rising repayments will deal an ongoing living standards blow to millions of households in the run-in to the General Election.”
Meanwhile, cabinet minister Michael Gove was asked in a recent TV interview if the government would be offering help for those who will find it difficult to continue meeting their mortgage repayments. Mr Gove said that the option was being kept ‘under review’ and that there are currently no plans to roll out any support.
Anyone who is worried about finding a new mortgage deal is advised to contact a broker who has good inside knowledge of the mortgage market and will be able to identify the most suitable products for their circumstances.
A UK Finance spokesperson said: “Around 800,000 mortgage customers are scheduled to come off their fixed-rate deals later this year, and will likely face higher monthly payments.”
“If you’re struggling with your finances, you should speak to your lender as early as possible – don’t put it off. Lenders have a range of tailored options available and will work with you to find the best one for your individual circumstances.”
If you do have a bad credit history, including the use of a debt management plan (DMP), it may still be possible to get a mortgage deal. Anyone in this situation is advised to contact a specialist mortgage broker who understands the market and will know which lenders to approach.
If you’re looking for bad credit mortgage brokers in the UK, please get in touch with us today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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