One in three homeowners worried about interest rate rises

Claer Barrett offers advice on locking in fixed rate mortgages

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One in three mortgage customers in the UK say that rising interest rates mean they cannot afford their repayments, according to new research by Butterfield Mortgages. The survey of 2,000 UK adults found that a third (33 percent) of mortgage holders believe the interest rate hikes over the past year have made their mortgage repayments unaffordable. Among younger mortgage customers aged 18 to 34, the figure rises to nearly half (48 percent).

Since December 2021, the Bank of England has increased interest rates six times, with the base rate rising from 0.1 percent to 1.75 percent in the past nine months alone.

Some are predicting that the Monetary Policy Committee is expected to increase rates by 0.75 percentage points to 2.5 percent.

Butterfield Mortgages’ research showed that rising interest rates top many mortgage customers’ financial concerns – 44 percent said they are more worried about rates than inflation.

A similar number (42 percent) said they are considering switching to a different mortgage provider offering a longer fixed-term mortgage.

Alpa Bhakta, CEO of Butterfield Mortgages, said: “Borrowers are facing sharp shifts in the economic landscape.

“Our research has shown the extent to which six consecutive interest rate hikes by the Bank of England have impacted mortgage repayments and people’s wider financial concerns.  

“As lenders, we must do everything we can to help mortgage customers navigate the best possible financial path through these mounting challenges.

“This includes taking proactive steps towards anticipating borrowers’ evolving needs and offering greater flexibility with long-term and fixed rates, which may provide a sense of security over the potentially uncertain times ahead.”

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Over half of UK mortgage customers (53 percent) said they feel locked in with their current mortgage provider, while more than a quarter (27 percent) are actively shopping around for a new mortgage.

Millions of Britons could save over one hundred pounds a month on their mortgage repayments by moving onto a better deal.

Mortgage expert Daniel Knott told how a person’s mortgage options can significantly change over the course of five years.

He said: “I have recently completed a remortgage for a homeowner who was coming to the end of their five year fixed term product.”

Daniel continued: “When they had previously financed their property, their mortgage options were restricted due to adverse credit showing on their credit file.

“After reviewing their current circumstances, I was able to establish that due to the time elapsed, the historic adverse credit would no longer have any impact on their mortgage options.

“Therefore, they were able to switch from their current sub-prime lender to a high street lender.

“Over the course of five years, this added up to impressive savings of £8,232.60 – a huge saving in anyone’s books.”

Some homeowners may be tempted to pay exit fees to leave their fixed mortgage deal early – before another interest rate rise.

Mr Knott said: “If you wish to remortgage onto a lower rate and the savings you’ll make on the new mortgage are greater than the cost of early repayment charges and any fees attached to your new mortgage, then remortgaging earlier could be a good financial decision.”

He added that people can secure their next mortgage deal up to six months before their current fixed term deal ends.

Money Saving Expert has a useful guide to help people decide whether now is the time to remortgage.

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