Around 116,000 households will soon see the cost of their mortgage jump, with Financial Conduct Authority (FCA) data showing that their fixed-rate deals will come to an end this month.
The FCA says that if they do not secure a new deal and move on to their lender’s standard variable rate, they could face an interest rate of 7.49% or more.
Moneyfacts data shows that the average two-year fixed rate mortgage in June 2021 was 2.59%, but now stands at 5.26%. For five-year fixes, the average was 2.92% in 2018 but is now 4.97%.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said “The latest base rate rise will be disappointing news for borrowers who have been unable to refinance onto a fixed rate mortgage, yet another blow to their monthly outgoings amid a cost of living crisis. Those aiming to lock into a fixed rate mortgage for peace of mind will find average rates have come down slightly over the past month, but as rates average around 5%, this may still be unaffordable for some. The average five-year fixed mortgage rate is lower than the two-year fixed, which may encourage prospective borrowers to lock down their rate for longer. However, fixed mortgage rates could be unpredictable in the months to come, so some borrowers may even sit on their revert rate waiting for cheaper deals to surface. Whether fixed rates are destined to remain volatile or not, there is still an incentive for borrowers to fix, as the consecutive base rate rises have pushed the average Standard Variable Rate (SVR) to its highest point since 2007. A rate rise of 0.25% on the current average SVR of 7.37% would add approximately £780* onto total repayments over two years.”
“Inflated house prices and the relentless impact of the cost of living crisis will be taking its toll on borrowers, and there may be some concerned about whether this is the right time to take out a mortgage. Seeking advice is vital to ensure borrowers can comfortably afford to refinance based on their own individual circumstances. New buyers looking to get their foot onto the property ladder will still be facing a housing supply shortage and their deposits may not stretch far. These borrowers remain vital to keep the mortgage market moving, so hopefully more positive innovative changes will surface to support these buyers.”