According to research from Dashly, which based on a sample of 75,000 owner-occupier and buy-to-let mortgages with initial rates expiring between August 2023 and July 2024, the average monthly mortgage payment is set to increase from £747 to £1,035.
The result is an increase in mortgage payments to £3,456 per year, equal to around a 38.6 per cent rise.
The average mortgage rate will go from 2.29 per cent to 5.23 per cent.
The above assumes that borrowers will switch to the best available rate instead of going onto the standard variable rate.
Figures from UK Finance show that there are around 1.5 million fixed rates coming to an end in 2023, with 800,000 of those expected to mature in the second half of this year.
Brokers on Newspage said that the figures showed that remortgaging would be increasingly challenging in the next year due to rising rates.
2024 will be ‘brutal’ for remortgagors
Lewis Shaw, owner and mortgage expert at Shaw Financial Services, said that 2024 will be the “year of the remortgage” and given current market conditions it would be “absolutely brutal”.
He continued: “As more homeowners realise what their new mortgage may cost, there will almost certainly be a swing to downsizing for many.
“The bigger worry, with all this cash being sucked out of households’ disposable income, is how it will impact the economy overall. If we start to see job losses, this could drag us into a recession and hit the property market hard.”
Justin Moy, managing director at EHF Mortgages, agreed that 2023 would be a “significant challenge” as the “payment shock finally sets in for the majority of borrowers”.
“Rather than seeing significant volumes of property sales and downsizing, there could be more help from the Bank of Mum and Dad, who invested in many of the purchases in recent years and will want to protect this family investment.
“Also, other significant outgoings will be tempered, for example, the car industry may see a slowdown in new car sales and other discretionary spending will suffer, such as holidays. We all hope this is a short-term problem, and many will look to dig in and ride out the storm before they sell up,” he noted.
Lee Gathercole, co-founder at Rebus Financial Services, said that some borrowers were “left with no choice but to remain with their existing lender as they no longer fit affordability rules with other banks, even though this may not be the most cost-effective option”.
“We are starting to see more borrowers amending their mortgage features, such as increasing their mortgage term, or considering part and part or interest-only mortgages to help cushion the blow.
“Unfortunately, there has been a minority of people that have now considered selling and downsizing or moving back in with their parents and letting their home out. That’s how tough the remortgage crunch is proving,” he added.
