Home Mortgage Looming Christmas mortgage crisis for half a million UK households, warns Which?

Looming Christmas mortgage crisis for half a million UK households, warns Which?

by Joshua Garcia

Consumer group Which? has issued a warning about a potential financial crisis for over 500,000 mortgage-holding households in the UK. These households are facing the expiration of their fixed-rate mortgage deals during the costly Christmas period.

According to data from the Financial Conduct Authority (FCA), more than half a million fixed-rate mortgages are set to expire in November, December, or January. With the recent increase in interest rates, homeowners transitioning to new mortgage deals could face hundreds of pounds in additional monthly payments compared to their previous rates.

The Bank of England (BoE) has raised interest rates 14 times in an effort to control inflation, which has led to rising mortgage costs. The UK’s Consumer Prices Index (CPI) inflation rate eased to 6.8% in July, lower than the peak of 11.1% seen in October 2021, but still well above the BoE’s target of 2%.

This situation means that the era of rock-bottom interest rates that homeowners enjoyed for more than a decade is now behind us. Those who need to remortgage are experiencing the full impact of the rate hikes over the past two years. Ele Clark, senior money editor at Which?, emphasized the importance of lenders offering comprehensive customer support, as firms are obligated under the FCA’s Consumer Duty rules to support their customers throughout their mortgage term.

The average mortgage holder in the UK currently has approximately £147,000 left to repay. In September 2021, an individual with a two-year fixed-rate mortgage and 20 years remaining on their loan would have paid an average of £770 per month. However, the current monthly payment could rise to £1,106, representing a £336 increase per month or an additional annual cost of £4,032.

Another wave of mortgage deals is set to expire in spring next year, affecting over 180,000 homeowners. With current rates averaging around 6% for both two- and five-year deals, and with the possibility of further interest rate increases by the Bank of England, homeowners may find it challenging to secure new deals at rates similar to their previous ones.

Which? advises homeowners whose fixed-rate deals are ending by the end of this year to start exploring new mortgage deals now. It is important for homeowners concerned about meeting their mortgage repayments to contact their lender, as this will not affect their credit score. Which? also calls on banks to provide support measures such as temporary mortgage holidays, temporary interest-only payments, or extending the mortgage term.

In conclusion, the ending of fixed-rate mortgage deals for over half a million UK households during the Christmas season may lead to a financial crisis, with homeowners facing higher monthly payments due to increased interest rates. It is crucial for these individuals to seek new mortgage deals and contact their lenders for support and assistance during this challenging period.

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