Increase in mortgage payments as fixed-rate deals expire

Permalink: Increase in mortgage payments as fixed-rate deals expire
by Kay Murchie

1.4 million property owners face an increase in their mortgage payments of at least 60% when their fixed-rate deals expire.

Analysts are worried that the impact will result in a rise in repossessions. Furthermore, Michael Coogan of the Council of Mortgage Lenders (CML) is extremely concerned about this and is implying that some homeowners sell their property rather than risk being repossessed.

This group of people took out mortgages when interest rates were far lower but will have to switch to more expensive deals in the next year. Mr Coogan warned that there is a potential payment shock of anywhere between 30% and 60% for many.

Mr Coogan added that some homeowners could switch to new fixed or discount rates, however, some will have no alternative but to move costly variable rates.

For example, a homeowner currently paying £890 a month on a £150,000 mortgage fixed at 5% could see the figure increase to £1,424 a month on a variable rate.

The CML is urging the Bank of England to cut base rates from the current 5.75% to relieve the pressure. However, Mr Coogan did emphasise that another option is to agree with lenders to cap payments for a set amount of time.

The CML added that those with a poor credit rating could face big problems, including falling into arrears and repossession. Homeowners will need to protect themselves which could result in selling up and renting.