MORTGAGE MISERY
Mortgage warning as 420,000 households face £500 a month hike next year
A total of 4.4million households can expect to see their repayments increase
Around 420,000 households have been warned they will face mortgage hikes of £500 a month next year.
The Bank of England warned that a total of 4.4million households can expect to see increases to their repayments over the next three years.
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A typical household rolling off a fixed-rate mortgage in the next two years is due to face a jump of around £146-a-month, the report said – down on the last projection of £180 in June.
For between 1million and 1.5million the rise will be the second increase in rates they have seen, having already fixed to a higher price since interest rates started rising in the second half of 2021.
About 31% of all mortgages, equating to some 2.7million households, can expect to refinance on to a rate of at least 3% for the first time before the end of 2027.
After sharp rises in 2022 and 2023, interest rates started to fall from a 16-year-high of 5.25% earlier this year, with the central bank voting twice to cut the base rate in recent months, bringing it down to 4.75%.
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About 37% of households with mortgages have not yet fixed to a new rate since interest rates started rising in the second half of 2021.
But, about 27% of mortgage holders, or 2.4 million people, should see their monthly payments decrease before the end of 2027, having already seen rates rise.
The central bank also warned that the risk to the economy has increased in the last six months following the election of a swathe of new governments across the globe.
It explained that risks to the financial system from wars, trade tension and cyber attacks were on the rise, adding that growing geopolitical tensions pose a “significant” risk to banks and broader financial stability.
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Officials wrote: “Following elections in many countries, a range of macroeconomic and financial policies may change under newly-elected governments.”
In a survey of finance firms like banks and asset managers, “the proportion of those citing geopolitical risks reached its highest level” recorded by the poll.
The Sun's James Flanders explains how to find the best deal on your mortgage
This comes amid an escalation of Russia’s war in Ukraine in recent weeks, the ongoing war in the Middle East and the potential worsening of US-China relations.
US President-elect Donald Trump also recently vowed to slap higher-than-expected import tariffs on goods from Canada, Mexico and China, heightening fears of trade wars globally.
Despite the gloomy outlook the central bank stressed that UK lenders are still in a strong position to support households and businesses, even if the economic backdrop worsens.
Despite the wider economic outlook UK house prices have surged in the last year and this map shows the areas that have seen the biggest increases.
With homeowners facing uncertain times one of Britain's biggest mortgage lenders has shaken up the market by offering a short mortgage fix of just 18 months.
While many homeowners are anxious about their security prime minister Keir Starmer has brushed off rising mortgage rates, blaming banks’ “individual decisions”.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you're nearing the end of a fixed deal soon it's worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.
To find the best deal use a to see what's available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You'll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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