Mortgages: Finance squeeze for more than 100,000 households

Tens of thousands of Britons are facing a mortgage nightmare this month as their firm deals come to an end at a time when rates are rising and product availability is shrinking.

Data from the Financial Conduct Authority showed that 116,000 households are finalizing their fixed interest rates in June and facing rising repayments.

Ongoing turbulence saw Santander make unusual changes over the weekend, while TSB withdrew all of its ten-year fixes on Friday with just 150 minutes’ notice.

Further increases are expected this week — with the two-year average now at 5.38 percent and the five-year rate at 5.05 percent, according to Moneyfacts.

The financial data website also found that the number of fixed and floating rate products fell by about 400 in nine days — from 5,385 on May 22 to 4,995 on May 31.

Coventry Building Society will raise its fixed transaction rates tomorrow, after other lenders such as Barclays, HSBC and NatWest all raised their rates over the past week.

While many of the 116,000 households affected this month have already taken out new fixed-rate agreements, the larger effect is more likely for those with mortgages due in a few months that have not yet acted.

Among them are the 640,000 people who have deals expiring in the last six months of this year, according to data from the Office for National Statistics.

The recent market volatility that has led to reduced availability of mortgage products has been fueled by expectations of further interest rate hikes.

About 75 per cent of Britain’s 20 largest mortgage lenders have raised their rates since the market turbulence began on May 24. The times.

Higher-than-expected inflation numbers for April — when the consumer price index fell to 8.7 percent — caused traders to raise their expectations for price movements later this year.

That increased the “swap rates” used to determine mortgage deals, prompting lenders to reassess their offerings.

A number of providers have withdrawn selected fixed mortgage products in recent weeks and some have withdrawn their entire fixed rate offerings.

The market turmoil resulted in government bond yields spiked to the highest level since the chaos caused by Kwasi Kwarteng’s mini-Budget last fall.

That had led to an even bigger drop in mortgage deals in the market. In October there were only 2,258 offers.

Rachel Springall, financial expert at Moneyfacts, said: “Borrowers looking for a new deal may be concerned about the latest developments in the mortgage market.”

Meanwhile, a study published today by Hargreaves Lansdown finds that two in five people with a mortgage say their payments haven’t increased since interest rates rose – because so many are on fixed rates.

Sarah Coles, head of personal finance at the company, said: A nightmare is lurking for more than three million people.

“They’ve been shielded from the horror of rate hikes by a fixed mortgage so far, and when their deal expires, they’ll face the full force of the hikes in one fell swoop.”

She said anyone whose deal expires in the next year will see their monthly payments increase by an average of £192, but nearly two-thirds of people in the company’s survey said this would cause them financial hardship.

The only way to buy our forever home was with a marathon mortgage

Kirsty Devin

Kirsty Devine, from Halifax in West Yorkshire, says the only way she and her family could afford their ‘forever home’ was with a marathon mortgage.

The 37-year-old, who lives with her husband Darren, 42, and 15-year-old son Jack, will pay off the mortgage into her 60s.

The couple bought a five-bedroom, end-of-terrace house in 2014 with a 15 per cent down payment and a £200,000 34-year mortgage. They pay back £780 monthly.

“The monthly costs would have been so much higher with a standard mortgage, so we just couldn’t have afforded it,” says Kirsty.

‘The mortgage won’t be paid off until my husband turns 67, so no early retirement for us,’ admits Kirsty.

“It’s scary to think about the extra interest, but we managed to re-mortgage recently before interest rates started to rise and hold on to a good rate, so we’ve been lucky.”

If household finances allow, they’ll overpay mortgage so they’ve shaved a few months off the final loan term.

It comes as the Daily Mail reported today on how a record one in five new buyers are signing a 35+ year mortgage as interest rates rise.

But while spreading the loans makes them more affordable in the short term, it means homeowners will accumulate thousands of pounds more debt over the life of the mortgage over the life of the mortgage.

In many cases, they will still pay off the deals well into their 70s.

It shows how rising Bank of England interest rates, which have risen from 0.1 percent to 4.5 percent, are affecting the long-term financial future of new generations of buyers, as well as those who already own and are dealing with a home. with higher monthly bills.

The industry figures show that 19 percent of all loans that starters took out in March had a term of more than 35 years.

That compares to 9 percent in December 2021, when the Bank of England began raising rates to contain galloping inflation.

The March figure is the highest level since measurements began in 2005, when only 2 percent of new mortgages were taken out with such long maturities.

The figures also showed that more than half of the starters now take out a home loan of more than 30 years.

The data is part of a report due to be published this week by industry association UK Finance.

Figures from lender Halifax earlier this year showed that the average age of a first-time buyer had risen to 32 by 2022 – two years higher than a decade ago.

That suggests that if they opt for longer mortgage deals, first-time buyers are more likely to commit to repayments that extend into the end of their working lives, or even well into retirement.

Meanwhile, research from consultancy Stonehaven has predicted that a quarter of a million households will be at risk of defaulting on their mortgages this year.

The study, reported by The Sunday Times, estimates that 1.3 million homeowners are at risk of not being able to cope when their fixed-rate mortgages come to an end. Of those 230,000, their deals will expire at the end of 2023.