Britain is experiencing consecutive increases in interest rates which are placing serious financial pressure on households. While savers are benefiting from these rate hikes, homeowners are seeing their mortgage payments shoot up. Recent data from the Office for National Statistics (ONS) has revealed that 1.4 million households are facing the reality of higher interest rates in 2023 as they renew their fixed rate mortgages.
Within the first quarter of this year, 353,000 fixed rate mortgages for homes will have to be renewed.
The ONS estimates, based on Bank of England transitions data, forecasts the number of fixed rate mortgage deals coming to an end in 2023 will peak at 371,000 by the second quarter.
Furthermore, this Bank of England data also highlights that most mortgages in the UK are agreed at a fixed rate.
Some 86 percent of outstanding UK mortgages were repaid at fixed interest rates in the third quarter of 2023.
READ MORE: Pension triple lock ‘needs reform’ for ‘means-tested’ payments
Around 57 percent of those actively searching for a new deal in the New Year are currently paying less than two percent.
This is despite the fact that existing mortgage deals presently on the market are closer to six percent.
According to Hargreaves Lansdown, the average person who chooses to remortgage will pay £250 a month more on their new fixed rate deal.
Many households are currently deciding whether to remortgage now or stick with those returning to the SVR and waiting for fixed rates to drop.
Interest rates have been raised due to the Bank of England’s decision to hike the nation’s base rate nine times in a row.
As it stands, the UK’s base rate is at 3.5 percent in an attempt to mitigate the damage of rampant inflation on the economy.
Mortgage holders have had to bear the brunt of this difficult decision with 1.4 million now facing an annual payment rise of £3,000 for their home.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, outlined the “unpleasant shock” awaiting families up and down the country.
READ MORE: Waspi women wait for compensation verdict as ‘cruel’ rumours fly
Ms Coles added: “If the rate on a £100,000 repayment mortgage rose from two percent to six percent, monthly costs would rise £220 to £644. With a 300,000 mortgage, they’d rise £661 to £1,933.
“It’s why the HL Savings & Resilience Barometer, out today, shows that Generation Z and Millennial homeowners are going to be hit particularly hard – with their savings dwindling and consumer debt mounting.
“They’re more likely to have bought more recently, when house prices were higher, so will have bigger mortgages to finance.
“Many will only ever have borrowed at a time of rock-bottom rates, so they’ve never faced mortgage payments on this scale.”