Fixed deals due to expire for 75% of homeowners

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by Kay Murchie

A survey by Fool.co.uk, the financial comparison website, has discovered 75% of homeowners will see considerable increases in their mortgage repayments when their fixed deals expire this year.

It is estimated that 1.4 million homeowners will see their fixed-rate mortgage deals expire this year. Interest rates are currently 5.25% and with the majority of deals at least a percentage point above this, many people are likely to see a big rise in their monthly expenditure.

Four out of ten homeowners are on a rate of between 4.5 and 5% while one in five have a mortgage set between 5 and 5%. However, one in six homeowners will see their payments soar as they are fixed on deals where the interest is between 4 and 4.5%.

The survey revealed that the offers being made by lenders to those coming out of fixed rate deals are considerably higher than their current deals, with more than 40% of homeowners being offered standard variable rate mortgages of between 6 and 7%, and one in four being told that their repayments will be calculated between 7 and 7.5%.

The average standard variable rate is 6.3% - 1% higher than the Bank of England base rate.

Monthly repayments on a typical 25-year repayment mortgage fixed at 4.8% are £1,146. Each 1% increase in rates will mean a rise in repayments of approximately £120. Those who have been offered a standard variable rate mortgage at 6.3% will see their monthly repayments to jump £180.

David Kuo of Fool.co.uk said many homeowners will feel the full force of the credit squeeze when their special-rate mortgage deals come to an end.

However, a considerable amount of homeowners will find that the huge amount of offers that were once available has shrunk to no choice, as lenders limit their best deals to their preferred clients.

Homeowners should take action now and shop around for the best deals, concluded Mr Kuo.