Thousands of Brits face paying £4,655 more in mortgage payments in 2023 | The Sun

THOUSANDS of households face £4,655 a year bill hikes when they refinance their mortgages next year.

More than 1.8million fixed-rate mortgage deals are scheduled to end in 2023, according to the trade association UK Finance.

And these borrowers avoided the immediate impacts of the higher interest rate environment.

But they will get a shock when they come to take out a new fixed mortgage deal.

Those taking out a £200,000 mortgage in December 2022 face paying around £1,269 per month on a two-year fixed-rate mortgage, compared with around £881 per month if they had taken out a deal in December 2021, according to MoneyFacts.

Over the course of the two-year deal, this would add up to them paying around £9,310 more.


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Those with a £200,000 mortgage taking out a five-year fixed-rate face paying around £1,249 per month.

A year ago, they would have typically paid around £911 per month, based on the deals available in December 2021.

Over the course of a five-year mortgage, this could add up to a cost difference of around £20,000.

The calculations are based on a 25-year mortgage term and compared average mortgage rates on December 9 2022, with those in December 1 2021.

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The average two-year fixed-rate on December 1 last year was 2.34%, but by December 9 this year it was 5.84%.

And the average five-year fixed-rate on the market on December 1 2021 was 2.64%. On December 9 2022 it was 5.67%.

But do remember the rates borrowers are offered by lenders will depend on individual circumstances.

It comes as a string of Bank of England base rate increases over the last 12 months has pushed up borrowing costs.

And mortgage rates jumped in the wake of the mini-budget, with many deals also being withdrawn.

While borrowers on variable and tracker mortgages have felt the immediate impacts of base rate rises, those on fixed-rate mortgages have been cushioned from this – until they need to take out a new deal.

And around 78% of outstanding mortgages are fixed rates.

Average two and five-year fixed-rate mortgages breached 6% in the autumn of 2022, but lenders have slowly been making reductions to their mortgage pricing since then.

Base rate rises have pushed up borrowing costs immediately for some borrowers on variable mortgage rates.

The Bank of England base rose to its highest level in 14 years on December 15.

Interest rates shot up by 50 basis points from 3% to 3.5%.

It's the ninth time in a row that the BoE raised interest rates to try and tackle soaring prices.

But MoneyFacts’ figures show that, in the days after the most recent base rate increase, on December 15, the average two-year fixed-rate mortgage edged down slightly, from 5.83% to 5.82%.

The average five-year fixed-rate mortgage remained unchanged, at 5.63%, between December 15 and December 19.

Rachel Springall, a finance expert at MoneyFacts, said lenders are slowly making reductions to their fixed pricing.

"However, those with limited deposits might sit on the fence a little longer to buy their first home as the cost of living takes its toll," she said.

"Borrowers might prefer to lock into a longer-term fixed-rate mortgage during 2023 due to the prevalent interest rate uncertainties over recent months, but this will depend on their circumstances.

"As the mortgage market remains volatile, its vital borrowers seek independent advice to consider the deals on offer to them, or whether they need to be a little patient in hopes rates will fall further."

Mortgage borrowers also have less choice of deals generally than they did around a year ago.

On December 1 2021, there were 5,315 mortgage deals on the market, according to Moneyfacts.

But by mid-December 2022 there were just under 3,800 deals.

The choice of mortgage deals has improved, however, compared with 2,258 products counted by MoneyFacts on October 2 2022.

But it comes as UK Finance has predicted rising mortgage arrears from early 2023, increasing through the year and into 2024.

It expects the number of households in arrears to reach 98,500 next year, representing around 1% of outstanding mortgages.

The trade association is encouraging borrowers to contact their lender early to discuss the options available for their circumstances.

If you're looking for a new mortgage deal we've explained how best to go about this below.

How to choose the best mortgage deal?

There are lots of factors to consider when searching for the best mortgage deals.

The amount you can borrow and interest rate are important factors but you should also consider the type of mortgage.

Do you want the certainty of a fixed-rate mortgage or the flexibility of a tracker that could get cheaper rates and doesn't have exit fees?

There are mortgage calculators online that will let you compare the monthly cost of a mortgage based on the interest rate and any fees. 

A lender or mortgage broker will be able to offer advice on the best type of mortgage deal to meet your needs.

Shop around for the best mortgage deals rather than opting for the first bank you see.

Remember a bank or building society will only offer its own options which limits your choice.

You can also use a comparison website to find deals across the market based on your level of deposit and whether you want a fixed or variable rate.

A comparison website will usually let you search for all types of home loans such as for first-time buyers or the best buy-to-let mortgage deals.

This will give you an indication of what is on offer but you will need to do the application yourself.

Some lenders may not be on comparison websites so it is worth searching directly online as well.

Alternatively, a mortgage broker can help search the market more widely and find the most suitable deals for you.

Is it better to get a mortgage from a bank or a broker?

A bank may offer the best mortgage deal for you but shop around before you commit.

This is because a bank adviser will only offer their own products.

Limiting yourself to one bank's products could mean you end up paying more than you needed to or you may not even meet their criteria.

Alternatively, a broker can use their market knowledge to help decide which type of mortgage and lender is best for you.

This could be of benefit if you are self-employed or have a poor credit rating as they may have more experience dealing with these sorts of applications.

It saves time on doing multiple applications, as you just tell your broker your income and expenses and they will work out the best mortgage you can get.

They can usually help with your application and will fight your corner to get you approved.

A broker will be able to advise on a range of products from different lenders, but these may also be limited to a panel so you should check if they are tied or work across the whole market.

There may, however, be extra fees when using a broker.

A mortgage may have an application or product fee but a bank adviser won't charge anything on top of that.

In contrast, a mortgage broker may have their own fees for their advice.

When should I start looking for a new mortgage deal?

Getting your mortgage prepared when buying your first home can make you more attractive to sellers as they can see you have finance in place and are serious about proceeding with a purchase.

It can take a couple of hours or a few days in more complicated cases to get a mortgage in principle.

This gives you an idea of how much you can borrow, and you can usually get a decision within hours or a few days in more complicated cases.

You can do a full application once you have had an offer on a property accepted.

It can take four to six weeks for a mortgage to be approved depending on how much information a lender needs.

A seller will usually wait, once they have accepted your offer, for you to get your mortgage sorted.

But having an idea of what you can borrow in advance will speed up your purchase and ensure you don't miss out on your dream home.

More preparation is needed if you are remortgaging.

A lender will move you onto a more pricey SVR once your mortgage deal comes to an end.

That means you could have been on one of the best mortgage deals and suddenly your monthly repayments will increase.

You should start looking for a new mortgage at least three months before your deal ends.

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It can take at least two months for a remortgage to complete so you need to allow time to find a new deal and make the application.

Mortgage offers typically last up to six months, so you could start early if you spot a good rate and time the start date so you avoid any exit fees and move smoothly onto the new rate once your deal expires.

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