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Homeowners face £3,900 mortgage rate shock
Story by Melissa Lawford • Yesterday 01:00
London homeowners will see their annual bill jump by up to £7,300 when they remortgage this year as 3.5 million borrowers face a rate shock.
Nationally, homeowners will have to spend nearly an extra £9bn in interest over 2023 and 2024 as they are forced to refinance at rates that are double what they are used to, according to the Centre for Economics and Business Research.
In total, 2.5 million homeowners will come to the end of fixed rate deals across 2023 and 2024 while a further one million are on variable rate deals.
Mortgage rates have soared after higher than expected April inflation data spooked financial markets and brought much higher expectations of future borrowing costs.
CEBR has forecast that mortgage rates, across all deposit sizes, will average 5.1pc across 2023 and 4.6pc in 2024. According to Moneyfacts, a data company, a buyer taking out a two-year fix in June 2021 paid an average rate of 2.59pc. This means the annual cost of taking out a typical £200,000 loan has jumped by more than £5,000.
Benjamin Trevis, of CEBR, warned that homeowners coming to the end of fixed rate deals face a “grim reality” as the cost of refinancing strains their incomes.
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Mr Trevis said: “While the Bank’s tightening cycle might be nearing its end, the impact on households is only just beginning.”
The average UK homeowner will have to pay £3,900 a year more in interest when they refinance this year compared to their previous deal. This means their monthly mortgage bills will jump by £325.
Those refinancing across 2024 will have to pay an extra £3,200 per year.
Homeowners in the most expensive parts of the country, where house prices are highest and borrowers therefore have the largest mortgages, will see the biggest cash increases. A London homeowner coming to the end of a fixed rate deal this year will have to pay an extra £608 per month when they remortgage. Those refinancing in 2024 will have to pay an extra £5,900 in interest each year.
Homeowners in the South East will have to pay an extra £450 per month when they remortgage in 2023.
Although these are the richest parts of the country, they are also the places where housing affordability is most stretched. Data from the Office for National Statistics shows that the average home in London is 12 times more expensive than average annual earnings. In the South East, homes cost 11 times earnings.
Mr Trevis said: “This stresses affordability concerns for those with a mortgage even in the country’s more affluent regions.”
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Source: MSN
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