Over 100,000 Britons who have fixed rate mortgages that are ending this month are facing a significant increase in monthly repayments. The average two-year fixed rate has more than doubled from 2.59% in June 2021 to 5.90% today. This means that monthly repayments on an average house for a two-year rate taken out today would be £1,326, compared to £963 two years ago, representing a rise of £363. Mortgage holders are also concerned about further increases in repayments as there are expectations that interest rates will be raised by the Bank of England to address rising inflation. Markets are predicting that rates could peak at 5.75% or even 6%, leading to further increases in mortgage rates. The Chancellor, Jeremy Hunt, has pledged support to the central bank’s efforts to combat inflation but has acknowledged the pressure this puts on families and businesses with loans. According to the Financial Conduct Authority, around 116,000 borrowers will be affected by the end of their fixed rate deals this month. If interest rates continue to rise as predicted, reaching at least 5.75%, or even 6%, the situation could worsen for these borrowers. The average two-year fixed rate in June 2021 was 2.59%, leading to monthly repayments of £963 on a 25-year term. Assuming all monthly payments were made, there would be a remaining mortgage balance of £200,122. With the current average rate of 5.90% and 23 years remaining on the mortgage term, the monthly repayments would increase to £1,327. The total repayment over the remaining 23 years would be £366,134, including interest of £166,012. The increase in mortgage rates is causing concern, with HSBC recently withdrawing mortgage deals from the market, and experts warning of more financial difficulties to come. However, there is some short-term relief as the average fixed-rate mortgage deals have not risen further towards the 6% mark. The average five-year fixed rate has actually decreased slightly to 5.54%.
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