Millions of Brits face new mortgage misery as payments to rise by £500

12 July 2023 , 19:20

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Around 450,000 households will have to find their monthly mortgage costs rising by £750 or more (Image: PA)

The monthly mortgage payments of nearly a million households will rise by £500 due to soaring interest rates, the Bank of England warned. It said between now and the end of 2026, around 3.8 million households will fork out up to £199 a month more in repayments.

This is because their two or five-year fixed-rate deals will have expired, forcing them onto their lenders’ standard rates, which have risen due to the increases in the Bank’s base rate. More that two million mortgage holders will have to pay up to £499 more, and half a million will see their repayments increase by £500 to £749.

Around 450,000 households will have to find their monthly mortgage costs rising by £750 or more. The Bank said that 4.5 million people have seen their mortgage costs rise since its Monetary Policy Committee started hiking its base rate in late 2021 in a bid to bring inflation back under control.

It said: “Higher rates are expected to affect the majority of the remainder by the end of 2026.”

The average homeowner coming off a fixed-rate deal this year will end up paying around £220 more, the Bank said, based on current quoted rates.

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Higher mortgage rates will add to the squeeze on household finances hit by rising prices and stagnating incomes, the Bank said.

It forecasts that the amount of money people spend on servicing their mortgages, as a percentage of their post-tax incomes, will rise from 6.2 per cent to eight per cent by mid-2026.

This comes after it was revealed that mortgage costs have officially hit the highest level for 15 years with the average rate for a two-year fixed deal hitting 6.66 per cent.

According to MoneyFacts.co.uk, the average two-year residential fixed rate today was 6.66 per cent - up from 6.63 per cent on Monday.

MoneyFacts told The Mirror that the last time two-year mortgage rates reached this high was in August 2008.

Geoff Ho