Mortgage ‘time bomb’ warning due to biggest increase in payments ever

Homeowners are facing the biggest spike in mortgage interest payments ever, it is claimed today, with thousands with a typical outstanding home loan doubling their monthly charges to nearly £500 over the next year.

The shock surge was predicted after an analysis of figures released by the financial regulator’s Office for Budget Responsibility (OBR) and follows attempts by the Bank of England to tame rising inflation by raising interest rates – which has caused mortgage rates to rise.

Homeowners are facing the biggest spike in mortgage interest payments ever, it is claimed today, with thousands with a typical outstanding home loan doubling their monthly charges to nearly £500 over the next year. (file image)

Homeowners are facing the biggest spike in mortgage interest payments ever, it is claimed today, with thousands with a typical outstanding home loan doubling their monthly charges to nearly £500 over the next year. (file image)

Homeowners are facing the biggest spike in mortgage interest payments ever, it is claimed today, with thousands with a typical outstanding home loan doubling their monthly charges to nearly £500 over the next year. (file image)

The Liberal Democrats, who conducted the analysis, calculate that for a typical household with an outstanding mortgage of £236,000, the increase would mean doubling monthly interest payments to £474 next year – an extra £2,851 a year.

The news will fuel new fears that the cost of living crisis will lead to property repossessions.

Last night, Lib Dem Treasury spokeswoman Sarah Olney said: “Homeowners are paying the price for the Conservative government to crash the economy.

“The ticking mortgage time bomb has only seconds left.

“That’s simply not manageable with the tax increases announced by the chancellor.”

The party wants the government to abandon a planned cut in fees levied on the banking sector and use the money to set up a mortgage emergency fund to help families ramp up their repayments.

The Office of Budget Responsibility forecasts that average interest rates on all mortgages borrowed will peak at 5% in late 2024

The Office of Budget Responsibility forecasts that average interest rates on all mortgages borrowed will peak at 5% in late 2024

The Office of Budget Responsibility forecasts that average interest rates on all mortgages borrowed will peak at 5% in late 2024

The OBR is basing its numbers on its forecast for the Bank of England’s policy rate, which is currently forecast to peak at almost 5 per cent in 2023-24.

She expects average interest rates on outstanding mortgages to hit 5 percent in the second half of 2024, the highest level since 2008.

Interest rates on new mortgages are already above that level, but the OBR said: “Due to the relatively large proportion of fixed-rate mortgages, it takes time for higher interest rates on new mortgages to translate into higher average mortgage rates on the stock of debt.”

Anyone who currently has an adjustable rate or tracker mortgage, and those whose fixed rates are phasing out, risks the higher fees. It is estimated that up to 1.8 million homeowners will expire their fixed-rate contracts in 2023.

Borrowers can use This is Money’s Mortgage Rate Increase Calculator to calculate how much their monthly payments could increase depending on various potential changes in the base rate.

Rate Hike Calculator

Calculate how much you would pay extra on your mortgage each month and each year if your lender changed the interest rate you pay.Enter a negative value to calculate a rate cut, e.g. B. -0.25%.

How high will interest rates rise?

Earlier this month, the Bank of England raised interest rates from 2.25 percent to 3 percent. The move came as it continued to try to rein in inflation, and the 0.75 percentage point hike was the largest rate hike since October 1989.

However, it was relatively larger, because at the time the Bank of England increased it by 1.13 percentage points from 13.75 percent to 14.88 percent.

It was the eighth consecutive rate hike by the Monetary Policy Committee since December 2021 – decisions that have led to a significant hike in mortgage rates.

But rates were also boosted by the aftermath of Liz Truss and Kwasi Kwarteng’s mini-budget, which prompted a huge round of unfunded tax cuts, shook markets’ confidence in UK government bonds and prompted a sell-off in the government bond market.

This sparked fears that the Bank of England would have to raise rates even more, and the uncertainty prompted banks and building societies to pull down mortgages and re-price the remaining offers at much higher rates.

That turmoil has since calmed after Jeremy Hunt and Chancellor and Rishi Sunak as Prime Minister restored a sense of stability and the Bank of England staged intervention in the gilts market over pension fund concerns.

The Bank of England will continue to raise interest rates to curb inflation, but how tough it will be is difficult to predict. Ultimately, it will be a balancing act between trying to keep inflation under control while averting a painful recession.

A little over a month ago, it was agreed that the key interest rate would reach as high as 6 percent next year.

However, some have since revised their view, thanks in part to changes in government and economic policies. Economists now expect interest rates to peak at around 4.75 percent.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate contract is expiring or because they have agreed to buy a home have been urged to act but not panic.

This is Money’s best mortgage rate calculator, powered by L&C and able to show you quotes that match your mortgage and property values

What if I need a debt restructuring?

Borrowers should compare interest rates and speak to a mortgage broker and be prepared to bargain to secure an interest rate.

Anyone with a fixed-rate contract that’s ending within the next six to nine months should assess how much a remortgage would cost them now — and consider signing a new contract.

Most mortgage deals allow fees to be added to the loan, which are then only charged upon closing. This allows borrowers to secure an interest rate without having to pay expensive brokerage fees.

What if I buy a house?

Those who have agreed to buy a home should also aim to secure the installments as soon as possible so they know exactly what their monthly payments will be.

Homebuyers should be wary of overstretching and be prepared for the possibility that home prices could fall from their current high levels as higher mortgage rates limit people’s ability to borrow.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rate calculator to find offers that match your home value, mortgage size, term and fixed rate needs.

Note, however, that interest rates can change quickly. So if you need a mortgage, you should compare rates and then speak to a broker as soon as possible so they can help you find the right mortgage for you.

> Check out the best fixed-rate mortgages you can apply for

https://www.soundhealthandlastingwealth.com/business/warning-over-mortgage-timebomb-from-biggest-hike-in-payments-ever/ Mortgage ‘time bomb’ warning due to biggest increase in payments ever

Brian Ashcraft

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