How much could your mortgage payment increase? (Source: www.creditstrategy.co.uk)
According to newly released data from the office of national statistics, mortgage owners in the UK could see their monthly mortgage payments triple in 2023! The ONS, the government department in charge of researching and reporting data and trends in the UK, released a report yesterday into property trends and the cost of living crisis. Among other facts, the ONS sensationally reported that over 1,400,000 households in the UK are likely to see their mortgage payments increase due to rising interest rates.
What Does The ONS Data Say About A Potential Mortgage Increase In 2023?
When you get a new mortgage, you normally elect to fix your product and rate for a period of time. This is aptly named ‘A fixed-rate mortgage’. The idea being to make sure that your mortgage repayments stay on a certain rate for a period of time, and therefore your mortgage payments per month won’t increase at all for that period of time. Most lenders will offer 2 to 5-year fixed products with some offering 3, 7 or 10-year fixed products. This also means that every year borrowers come off their fixed product as it comes to an end, and need to look at re-structuring and remortgaging their property finance to avoid falling onto the lender’s standard variable rate (SVR).
In any normal year, someone could look at coming of a fixed rate of 2% for example and speaking with their mortgage advisor about remortgaging on to another similar rate. 2% again perhaps, or maybe 2.5%. However, in 2022 we saw a huge increase in mortgage interest rates across the entire UK mortgage market, due to the worsening economic crisis we find ourselves in. In September and October 2022, we saw the average mortgage rate increase well past 5%, with some lenders offering products at 7 and 8%.
‘Most Fixed-rate Mortgages coming to an end in the next year were set at interest rates below 2%’
Mortgage payments will increase in 2023 (Source: www.ons.gov.uk)
If you fixed your mortgage for 5 years in 2021 or the first half of 2022, you should be fine and comfortable until 2026 or 2027 when rates will hopefully have come back down significantly. But, if your fixed product is coming to an and in 2023, now is the time to speak to a mortgage adviser immediately to make your plan of action.
The ONS have reported:
‘The majority of fixed rate mortgages in the UK (57%) coming up for renewal in 2023 were fixed at interest rates below 2%. Those deals that are due to mature through the course of 2024 will be from two-year fixed rate deals made in 2022 and five-year fixed rate deals made in 2019, when mortgage rates were generally higher than 2%.’
So let’s put that into perspective. If you had a 2-year fixed rate mortgage of £200,000 over 30 years in 2020 at a rate of 2%, your monthly mortgage payments would have been around £739 a month. Without the right guidance, your new rate and product could be as much as 6% or potentially more. That would mean that in 2023, your monthly payment could be £1,199! So what do we mean by the ‘right guidance’? Of course, we are talking about mortgage advice.
Using A Mortgage Advisor To Remedy Rate Increases
As mortgage advisors, the first thing to make clear is that unfortunately we can’t make lenders reduce their rates. As much as we’d like to be able to! But, we can help you to find the most competitive, cheapest rates on the market for your circumstances. We can’t stress enough how important this is, especially with so many people’s fixed rates coming to an end in 2023. Without the help of an advisor, you could risk either coming off your fixed rate and falling onto the lender’s expensive SVR which can be 6%+ anyway, or getting a standard new product with your own lender that will probably not be the best one available to you.
As whole of market brokers, we have access to thousands of different mortgage products and rates for every situation under the sun. And with over 25 years of experience in mortgages, there really isn’t a scenario that we haven’t seen before. If your product is coming to an end, our advisors and administration teams will act fast to find the next best lowest rate for you and make sure that we secure a new deal for you in a swift and timely manner. Even if your product isn’t immediately coming to an end, we can look into you options for you 6 months in advance so that we can make sure that everything is set up and in place for when the time is right to switch products.
The entire process is simple and easy through a mortgage broker, so why not give us a quick call to see how we can help?
