Yahoo Finance Looming Christmas mortgage crisis for half a million UK households, warns Which?
Costs likely to go up as Bank of England set to raise interest rates yet again
Consumer group Which? has warned of an imminent financial crisis for over 500,000 mortgage-holding UK households, set to face fixed-rate mortgage deals ending during the costly Christmas period.
More than half a million fixed-rate mortgages are due to expire in November, December or January, according to data from the Financial Conduct Authority (FCA).
With the hike in interest rates, affected homeowners moving onto new mortgage deals will have to pay hundreds more each month compared to their previous payments.
Interest rates guide mortgage costs which have risen since the Bank of England (BoE) has pushed rates up 14 consecutive times in an attempt to control inflation, bringing the base rate to 5.25%.
The UK's Consumer Prices Index (CPI) level of inflation eased to 6.8% in July. This is lower than the peak of 11.1% seen last October, but well above the BoE's target of 2%.
Read more: Where to find the best mortgage rates
To bring down inflation the BoE has raised interest rates to the current level of 5.25%. This means mortgage costs went up but people also saw a higher return on savings.
The next interest rate decision is set to take place this Thursday.
The leading two-year fixed rate mortgage is with Coventry Building Society and currently stands at 5.53%, according to Moneyfacts. This is down from recent highs and lower than the average earlier this month, which eclipsed 6%.
Brits who secured their deals in December 2021 could have enjoyed rates below 2%.
“The rock-bottom interest rates homeowners enjoyed for more than a decade are firmly behind us, and those who need to remortgage are feeling the full force of the last two years’ worth of rate rises,” said Ele Clark, senior money editor at Which?.
Clark stressed the importance of lenders offering comprehensive customer support, warning that under the FCA's Consumer Duty rules, firms are obligated to support their customers throughout their mortgage term.
“If they don’t, we’d expect them to face tough action from the regulator,” added Clark.
Watch: The Budgeting Mum on TikTok: 'I can not believe how much my mortgage is about to go up.'
What does it mean for the average mortgage?
The average mortgage holder currently has approximately £147,000 left to repay, according to the FCA.
In September 2021, an individual securing a two-year fixed-rate mortgage with 20 years left on their loan would have paid an average of £770 per month.
Currently, the monthly payment could rise to £1,106, reflecting a £336 increase per month, equivalent to an extra annual cost of £4,032.
Another wave of mortgage deals ending in spring next year will affect over 180,000 homeowners, according to the FCA.
With current rates averaging around 6% for both two- and five-year deals and another predicted interest rate increase by the Bank of England, homeowners are likely to find it challenging to secure a deal similar to their previous rates.
Read more: Interest rates push up mortgage costs for more than 4 million households, says Bank of England
Mortgage holders generally have the option to lock in rates up to six months before their current deal expires.
Which? advises homeowners whose fixed-rate deals are set to end by the end of this year to start exploring new deals now.
Support for households
For homeowners worried about their ability to meet mortgage repayments, the first step should be to contact their lender, a move that will not affect their credit score. Which? underscored the importance of lenders providing tailored support.
Mortgage holders whose fixed-rate deals are ending in April should start searching for and locking in competitive rates, Which? said.
Read more: UK house prices fall as interest rate rises set to push mortgages higher
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.
The consumer group is also calling for other support measures including temporary mortgage holidays, temporary interest-only payments, or extending the mortgage term.
Watch: How much money do I need to buy a house?
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