One of the main things that’s coming out still is that mortgage repayments are set to rise for 3 million households and this is from the Bank of England.
What you have according to the Bank of England is a Financial Stability Report and in this Financial Stability Report, around 3 million UK households will see their mortgage repayments rise over the next two years; that’s 3 million.
Of course, this is due to persistently high interest rates.
Let’s break down what this means and how it could impact you.
So, the Bank of England’s Financial Policy Committee has highlighted that there’s really approximately 400,000 homes that are set to experience very large increases in mortgage repayments.
Potentially, that could be almost like a doubling; a 50% increase.
This is a direct result of the base interest rate being brought to a near two decade high of 5.25% and staying there.
So interest rates have been high to combat inflation which had reached a 40 year high, while inflation now stands at the Bank’s target of 2%.
The high interest rates have made borrowing more expensive, thus limiting spending.
So, despite the increased base rate, over a third of mortgage holders, or 35%, are still paying a mortgage rate of less than 3% because they’re still on their old rates.
They secured deals before the energy price shocks were triggered by the war in Ukraine and the challenge is that these deals are gonna come to an end and households will need to sign up for more expensive products.
Most mortgage holders have already repriced since rates began to rise in late 2020.
What the report indicates is that a typical household rolling off a fixed rate mortgage before the end of 2026 could face a monthly increase of around £180-not nice.
The Financial Policy Committee reassures that the UK lenders are in a strong position to support homes and businesses but what does that actually mean?
They reckon even if economic conditions worsen, they can help and the Committee’s role is to ensure the UK financial system can handle economic shocks and risks but currently, interest rates are definitely expected to decrease in the coming months; we’ve been waiting for long enough.
Cuts are forecast for August, September, November and December, so that’s a whole six months of cuts; however, you know, I don’t think consumers should expect a return to the era of ultra low interest rates.
So what does this mean for you?
If you’re a homeowner, it’s crucial to stay informed about these changes and plan accordingly.
If your fix rate deal is ending soon, you might want to explore your residential remortgage options sooner rather than later.
So, you know, if you need advice, please don’t hesitate to reach out and I can give you some quotes.