Yahoo Finance Hundreds of thousands to escape mortgage crisis in boost for house prices
More than one in 10 borrowers will escape the mortgage crisis unscathed, analysis suggests.
Some 1.6 million out of more than eight million mortgage borrowers in Britain are locked into five-year fixed mortgages taken out around the pandemic property boom years when interest rates fell to historic lows.
They are not due to refinance until 2025 or after, when analysts now expect interest rates will have reverted back to far more manageable levels.
It means hundreds of thousands of people who took out loans to buy residential property from 2020 onwards are likely to escape the era of surging interest.
This will likely come as welcome news for those concerned high rates would act as a drag on house prices.
Fears high interest rates would lead to a crash in the housing market have so far failed to materialise.
The Office for Budget Responsibility predicted in March last year that house prices would crash close to 10pc in 2023.
Its latest forecast, unveiled alongside last year’s Autumn Statement, revised this and said prices would instead rise by almost 1pc in the same period.
But Aaron Strutt, of broker Trinity Financial, said lenders had already started to cut interests well below levels north of 6pc seen in late 2022 on the back of falling inflation.
“Things are clearly a lot better,” he said, adding that some lenders were already offering below 4pc interest fixed deals.
“If your mortgage is coming up for renewal over the next six months it makes sense to book a rate and make sure you’re covered.”
“The general expectation is that rates will get cheaper, but there’s no guarantee,” he said.
Homeowners will be able to remortgage and take advantage of 3pc rates by 2025, according to a forecast by Capital Economics.
Analysis of figures from the banking trade body UK Finance show that on top of 1.6m households protected by five-year fixes there are more than 75,000 borrowers signed up to fixed interest periods of more than five years.
In addition to this, more than half of homeowners in Britain do not have a mortgage. This provides another layer of protection for the housing market from distressed sales caused by high borrowing costs.
David Hollingworth, associate director at L&C Mortgages, said: “The rates have shot up because there is something of a lag period.
“The big benefit of that is as rates have risen rapidly many [borrowers] have been protected from those increases.
“There’s a lot who will be coming towards the end of their fixed rate. The most unfortunate ones would have already come to that point and had to refinance.”
He added: “Thankfully it looks like inflation is coming under control for all the external reasons that drove it up in the first place.”
The Bank of England is expected to ease rates to around 3pc by the middle of the decade allowing lower interest deals to come back onto the market.
Major lenders have already begun cutting mortgages amid anticipation central interest rates will fall faster than previously thought this year.
Mortgage rates have already fallen to a six-month low amid growing competition between lenders.
The Bank of England has held interest rates at 5.25pc but markets have predicted the Bank will reduce interest rates by a whole percentage point to 4.25pc this year, up from a projected fall of 0.75pc.
A total of 8.76m mortgages are outstanding and 1.5m borrowers will end their fixed interest periods this year, UK Finance data show.
