A remortgage nightmare is lying in wait for over three million UK homeowners, according to a survey conducted by Opinium for Hargreaves Lansdown.
Despite rate hikes by the Bank of England, two in five people on a mortgage reported that their payments have not risen due to being on fixed-rate deals.
However, the survey of 2,000 people conducted in May 2023 revealed that one in five respondents said their monthly payments have already increased by more than £200 in the past 18 months. Furthermore, 16% of people admitted they are already struggling with their mortgage payments. This figure rose to 21% among those aged 55 and over.
Most worryingly, nearly half (48%) of those with a mortgage said they would struggle if their monthly repayments increased by as little as £150.
Sarah Coles, head of personal finance at Hargreaves Lansdown, warns of an impending disaster for homeowners whose fixed-rate deals are due to expire. “There’s a remortgage nightmare lying in wait for more than three million people. They’ve been shielded from the horror of rate hikes so far by a fixed mortgage, and when their deal runs out, they face the full force of the rises in one single hit,” she said.
Coles explained that the nightmare results from a cumulative interest rate increase of 4.4% after 12 consecutive Bank of England rate rises. While those on a standard variable rate or tracker have felt the effects, around half of those on fixed deals have been shielded from the hikes.
According to the Office for National Statistics, 1.3 million fixed deals are expected to end in 2023, with most under 2%. Currently, the average 2-year fixed mortgage costs around 5.5%. If rates don’t fall back before these homeowners have to remortgage, it could spell disaster for hundreds of thousands of people, particularly those with larger mortgages.
Despite the grim scenario, there remains a glimmer of hope that rates might drop by the time remortgaging is due, which could spare homeowners the worst of the financial impact. However, Coles warns that significant reductions in mortgage costs may depend on a cut by the Bank of England – currently not expected until 2024.
