At the end of 2022 mortgage rates in the UK increased to levels that I think we can fairly say that no one expected. This was mainly due to a mismanagement of taxes and budget by the government at the time. Products offered by lenders originally at sub 2% were coming back to the market with revised figures of 5, 6, even 7% meaning that new borrowers and existing were facing much more expensive mortgage payments. So which areas of the country were hit worst with the mortgage payment hike?
Areas Most Affected By The Interest Rate Hike
Thankfully the mortgage interest rates have calmed down over the last few months. Many lenders have significantly brought their rates down and continue to do so as they recover from the initial shock. However rates are still higher than they have been for years and there are thousands of people who will be coming off their fixed rate product this year. These people will be hit head on by the impact of the mortgage payment hike.
The Independent in an article released this week highlighted some of the areas in the UK who are most likely to be impacted by rate increases, based on research by the Census and the Liberal Democrats. According to the data the area with the highest proportion of mortgage borrowers is South Northamptonshire, with 20,420 households owning their home with a mortgage. This works out to 40% of all households in the area being mortgaged. The second highest reported is second is Wokingham in Berkshire, where 18,695 households have a mortgage. Another 40% figure as well.
Households Facing Mortgage Payment Hike
As we reported in our article earlier this week on properties needing to remortgage, the ONS estimates that 1.4 million households will need to remortgage this year alone as they are coming to the end of their fixed rate period. The figures reported on by the independent mean that a disproportionate amount of homeowners in South Northamptonshire and Berkshire will be coming off their fixed mortgage products secured 2 – 5 years ago, and will need to find a new lender and product.
Other areas such as South Derbyshire, Dartford, North East Hampshire, and Cheadle all have a similar percentage of residents with mortgages.
The Bank of England has also weighed in on the topic of people coming to the end of their fixed rate mortgage saying that the average person exiting a fixed-rate mortgage product could face around £3,000 in extra interest payments from 2023 onwards. Lets have a look at an example of what this could look like.
Example Of How Homeowners In Wokingham Could Be Impacted By Mortgage Hikes.
According to Rightmove, the average property price in Wokingham is £544,856. If we looked at a standard 75% mortgage balance on an average property this would equal £408,642. A standard term of 30 years at an interest rate of 2.5% (pretty standard for pre 2022) you would be paying around £1,615 a month for your loan or just under £20,000 a year. However, if your fixed rate period comes to an end in 2023 you could be paying as much as 6% for your mortgage (worst case scenario) which would bump your payments up to £2,450. £29,400 a year. That almost adds another £10,000 on to the annual amount your mortgage costs.
Of course these are just estimate figures and other areas of the country are less impacted by mortgage rate hikes, but it really highlights the importance of acting fast and getting a new competitive mortgage rate and product through a professional and experienced mortgage advisor. If you or anyone you know is need of mortgage advice when your fixed product comes to an end, please give our friendly and helpful team a call. We are here to help.