Fears mortgage rates could leap to 7% interest when homeowners’ current deals end
Fear mortgage rates could rise to 7% when current homeowner deals end
- Markets bet Bank of England will raise rates to 6% by November
- About 800,000 homeowners will have to take out a new mortgage in the next six months
Hundreds of thousands of homeowners could face mortgage rates of up to 7 percent when their current contract expires this year.
About 800,000 homeowners will need to take out a new mortgage in the next six months, but could face rates nearly three times what they were when they landed their original deal.
It comes amid fears the Bank of England will continue to raise rates after voting yesterday for the 13th time in just 18 months to raise rates to a 15-year high of 5 percent.
Markets yesterday bet on the Bank raising rates to 6 percent in November – and staying at that level well into next year, into May.
Luke Hickmore, director of investment firm Abrdn, said: “If we hit a base rate of 6 percent by the end of the year, that would imply significantly higher fixes as they get through the fall.
The Bank of England (pictured) yesterday voted to raise interest rates for the 13th time in 18 months, to 15-year highs of five per cent
Around 800,000 homeowners will need to re-mortgage in the next six months (File photo: Townhouses in Crewe, England)
“The rates can even be as high as 7 percent for a two-year fix.”
According to the National Institute of Economic and Social Research, more than one million homeowners will run out of savings due to higher mortgage payments, leaving about 30 percent of households insolvent.
More than 300,000 of those forced to close a new deal won their original rates in the second half of 2021, when the two-year average fix was about 2.2 percent.
A homeowner with a £300,000 mortgage would have to pay £19,680 more over two years than on the original rate, according to L&C.
Yesterday Virgin, Santander and Barclays all increased their SVR deals to reflect the rise in base rates.