Homeowners warned of mortgage payments timebomb

manchestereveningnews.co.uk:

Over 1.6 million UK homeowners are facing a potential mortgage crisis as their fixed-rate deals are due to expire in 2024, which could lead to significantly higher monthly payments.

These homeowners have been benefiting from historically low fixed mortgage rates of around 2% or less in recent years. However, a series of aggressive interest rate increases by the Bank of England over the past 24 months has pushed the average two-year fixed mortgage rate above 5.5% as of July 2024, with some standard variable rates reaching as high as 9.49%.

This means that when these homeowners' fixed terms end, they could face hundreds of pounds per month in additional costs to remortgage, putting a severe strain on household budgets. "For 13 years, the Bank of England kept the base rate locked below 1%, and the thought of it suddenly ramping up to 5.25% was almost unimaginable," said Alastair Douglas, CEO of credit experts TotallyMoney. "People became used to cheap money - and rock bottom rates helped drive up property prices." Data from the Office for National Statistics shows that UK house prices rose by over 20% between 2020 and 2022, as rock-bottom interest rates fuelled a pandemic-driven property boom.

However, the rapid reversal of this trend has left many homeowners vulnerable. According to Moneyfacts, the average two-year fixed mortgage rate was a mere 1.99% in July 2022 but has since climbed to 5.52% by June 2024 following the Bank of England's interest rate hikes from 0.1% to 5.25%, aimed at tackling high inflation.