Hundreds of thousands of British homeowners are bracing for a significant financial jolt as their fixed-rate mortgage deals are poised to expire in the coming months. According to a stark warning from UK Finance, this will trigger a sharp rise in monthly repayments for many, exacerbating the ongoing cost of living crisis.
The trade body's data reveals a looming 'payment shock' for borrowers who secured ultra-low interest rates before the Bank of England began its aggressive cycle of hikes. These homeowners now face the prospect of remortgaging at significantly higher rates, adding hundreds of pounds to their monthly outgoings.
The Scale of the Challenge
UK Finance estimates that a substantial 1.6 million fixed-rate mortgage deals are scheduled to conclude throughout 2024. The situation is particularly acute in the immediate term, with approximately 200,000 deals set to mature in the second quarter alone.
Matt Smith, a mortgage expert at the financial services firm, Rightmove, emphasised the urgency for homeowners. "Borrowers coming off a fixed rate in the next few months are likely to face a payment shock," he stated. "It is crucial they start shopping around for a new deal well in advance to mitigate the impact."
Why Act Now? The Power of a Deal in Principle
Experts are strongly advising homeowners not to adopt a wait-and-see approach. Securing a new Agreement in Principle (AIP) with a lender is a critical first step. This provides a clear picture of what one can borrow and locks in a potential rate, often for up to six months.
This strategy offers a crucial safety net. If interest rates were to climb further during this period, the borrower is protected by the previously agreed-upon rate. Conversely, if rates fall, they are typically free to abandon the agreed principle and secure a more favourable deal.
A Glimmer of Hope: Stabilising Rates
While the situation remains challenging, there is a slight silver lining. After a period of intense volatility, mortgage rates have recently shown signs of stabilisation. Lenders are gradually introducing more competitive products to the market, providing a broader range of options for those looking to remortgage.
However, the overarching message from the industry is clear: complacency is costly. Homeowners must proactively seek advice, compare the entire market, and secure a new deal well before their current term ends to avoid being automatically moved to a lender's much higher standard variable rate (SVR).
