As interest rates continue to increase, mortgage borrowers expect their monthly payments to increase by an average of £617 over the next two years, new research by The Mortgage Lender (TML) reveals.
According t0 the study, 80% of homeowners surveyed reported being concerned about the effect of rising rates, with 37% being extremely concerned and 43% being somewhat concerned. This worry is especially prevalent amongst younger homeowners, with 25–34-year-olds being the most worried (88%) amongst the age groups.
This anxiety is only increased as many mortgage products approach renewal. Over one in ten (11%) of mortgage borrowers say they need to renew their mortgage in the next six months, and 14% will renew their mortgage between six months and a year.
Many will face a steep increase in how much they’re paying each month. When asked how much more homeowners expected their mortgage to rise by per month, the average consensus was £617.45. This is a stark contrast to the same question asked in November 2022, when the average expected increase was over £400 lower at £176.84.
Encouragingly, of the same property owners who expect their mortgages to increase, over a quarter (28%) are speaking to their mortgage lender, and a quarter (25%) are speaking to their mortgage broker ahead of their renewal, in the hope of finding the best possible deals.
Other pathways being explored include looking for a higher paying job (18%), taking out a mortgage with a longer term (13%), borrowing money from their parents (9%), going back to work (7%), selling their property, and moving back to renting (5%), and some (4%) are considering selling their BTL property.
However, almost one in five (19%) are not doing anything to account for higher mortgage costs. A similar number (18%) are drawing on long term savings, which while a fix in the short term could leave them in a vulnerable financial position later down the line.
Steve Griffiths, CCO at TML, commented: “With rates rising steadily over the last year, homeowners have been living with this new reality for a while now. However, as many mortgages start coming up for renewal, the affordability challenges within the market are starting to hit more mortgage borrowers.
“When we last conducted this research homeowners expected their monthly payment to rise by £176.84, however this has now increased substantially, posing more of a challenge for borrowers who are already being hit with rising costs elsewhere.”
