Over 367,000 fixed-rate mortgages are due to come to the end of their five-year deals over the next year, the majority of which have an average outstanding balance of £170,000, Equifax analysis revealed.
This will mean an average increase in monthly repayments of around £300 if customers revert to a variable rate.
Over the past year, interest rates have continued to rise, causing more homeowners to feel the squeeze. As the base rate rises, mortgage rates have consequently done so too.
Experts believe the base rate could rise further in the coming months, potentially hitting highs of 5.5 percent. As a result, hundreds of fixed-term deals have been taken off the market and reintroduced with higher rates as providers reassess their options.
A host of major lenders have upped their fixed-rate deals over the past week by up to 0.85 of a percentage point.
In the space of a fortnight, the average two-year fix rose from 5.33 percent to 5.72 percent, while the average five-year fix has also risen, going from 5.01 percent to 5.41 percent, according to Moneyfacts.
For those entering the housing market, average monthly repayments have increased by 40 percent. The average mortgage applicant at the end of 2021 would pay around £1,000 a month, whereas now they could pay up to £1,400.
Considering that the average monthly income in the UK is £2,560 mortgage payments will likely take up over 50 percent of people’s monthly income, whilst households try to manage skyrocketing bills and turbulent interest rates.
Paul Heywood, Chief Data & Analytics Officer at Equifax UK, said: “There is a risk that some consumers could become mortgage prisoners with the current state of rates. Amongst these consumers, we expect to see a gradual increase in missed payments.
“Diminishing affordability levels may also restrict or even stall growth in house prices, perhaps leading to a correction in the housing market.
“The starting point for lenders and credit providers is to understand which of their customers are most likely to be impacted by rising mortgage rates, what the extent of that rise is likely to be, and the likely timing of that impact.
“Through Open Banking analysis, we can support lenders to anticipate such changes and act accordingly in the face of the looming mortgage shock, by analysing customer affordability, amongst other factors. We can also help limit lending to over-indebted consumers and provide support on how to roll this out.”
Equifax analysis has revealed 7.7 million of the 10.7 million currently open mortgages are on a fixed-rates.
As thousands of these fixed rates are coming to an end this year, Ben Thompson, deputy CEO at Mortgage Advice Bureau shares top tips to help anyone coming off a mortgage deal.
He urged Britons to get in early as interest rates are likely to go up before they come down.
Many lenders will allow people to move onto a new rate three or six months before the official end of their current rate.
Secondly, he suggested that Britons know their credit score and, if required, do as much as they can to improve it.
This might involve closing old bank accounts, making sure they are on the voters on the electoral roll, they have declared their address, or looking at their credit limits.
Additionally, he suggested speaking to a mortgage broker or advisor to lock in exclusive rates and deals.
Whilst one’s lender will most likely offer them a deal to keep them, in many instances a Mortgage Adviser will be able to beat it, quite simply because they will be able to access deals from circa 100 lenders, not just one.
