An influential UK think tank has said that the continual rise in interest rates will eventually cost UK mortgage holders £12bn in increased payments. The Resolution Foundation recently published a report into the impact of higher interest rates on mortgages, which makes painful reading for those coming to the end of a fixed term mortgage deal.
So far, the rising interest rates have added an extra £4.5bn onto repayment rates, with another £8bn predicted to be added this year, The Guardian reports. A UK homeowner with an average sized mortgage can expect to pay an additional £2,300 in interest alone when they remortgage.
Simon Pittaway, senior economist at the Resolution Foundation, said: “People moving on to new fixed-rate deals over the next year can expect to see their annual mortgage costs rise by an eye-watering £2,300 — with young families and low- and middle-income households with mortgages facing the biggest living standards hits.”
The Bank of England said in its latest monetary policy report: “For the average mortgagor within that group, monthly interest payments will increase by around £200 a month if their mortgage rate rises by 300 basis points — the increase implied by quoted mortgage rates.”
The BoE predicts that around 1.3 million households will need to renew their mortgage over the next six months. To avoid being transferred directly onto your lender’s standard variable rate (SVR), which is usually the most expensive option, it’s important to do some research to find out what your best options are.
If your financial situation has changed since you last secured your mortgage deal, it’s even more crucial to find out where you stand. You may have to undergo fresh affordability checks, and if you have incurred any debts or otherwise impacted negatively on your credit history, then you may find that your options are more limited.
In this case it may be advisable to get in touch with a mortgage broker for bad credit. They will potentially be able to help you find the most suitable product for your circumstances at a more favourable rate than you would be able to do alone.
The broker will have experience of dealing with specialist lenders who may be able to accept a proposal that a more mainstream lender would reject.
There is still a lot of uncertainty around how the economic situation will play out in the coming months, with the UK narrowly avoiding a recession, but showing the weakest economic growth of all of the G7 nations of the world’s most developed economies.
Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: “The likely squeeze on consumer spending and investment from higher taxes, and the lagged impact of rising interest rates, may mean that our growth prospects are weaker than the Bank of England currently expects.”
Although energy prices have started to fall, this will be offset by impeding income tax rises for many UK workers this year.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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