UK homeowners are facing a potential financial crisis as over 500,000 fixed-rate mortgages are set to expire during the upcoming festive season. This situation is expected to coincide with another predicted interest rate increase by the Bank of England (BoE), which would further escalate monthly payments for those moving onto new mortgage deals.
The warning comes from consumer group Which?, who reported on Wednesday that these mortgage deals, due to end in November, December or January, could result in homeowners paying hundreds more each month compared to their previous payments. The Financial Conduct Authority (FCA) confirmed these numbers and anticipates another wave of mortgage deals ending in spring next year, affecting over 180,000 homeowners.
The BoE has raised interest rates 14 consecutive times in an attempt to control inflation, bringing the base rate to 5.25%. This move has led to increased mortgage costs, although it also resulted in higher returns on savings. The next interest rate decision is scheduled for this Thursday.
The current leading two-year fixed-rate mortgage stands at 5.53%, offered by Coventry Building Society, according to Moneyfacts. This figure is lower than the recent highs and the average earlier this month, which exceeded 6%. However, those who secured their deals in December 2021 could have enjoyed rates below 2%.
Ele Clark, senior money editor at Which?, noted that the era of rock-bottom interest rates homeowners enjoyed for more than a decade is firmly behind us. Clark emphasized the importance of lenders offering comprehensive customer support under the FCA's Consumer Duty rules.
The average UK mortgage holder currently has approximately £147,000 left to repay. In September 2021, an individual securing a two-year fixed-rate mortgage with a remaining term of 20 years would have paid an average of £770 per month. However, with the present rate, the monthly payment could rise to £1,106, reflecting a £336 increase per month or an extra annual cost of £4,032 (£1 = $1.2357).
Which? is calling on banks to offer support to customers, especially during the festive season. This includes adequate staffing and resources for customer service support through phone calls, email assistance, and chat support. Which? is also advocating for other support measures such as temporary mortgage holidays, temporary interest-only payments, or extending the mortgage term.
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