Over 1.4 million people will remortgage onto a higher rate this year, according to figures published by the Office for National Statistics (ONS).

And they’ll face average monthly mortgage hikes of £250.

Bank of England figures showed that the number of fixed rate mortgage deals coming to an end in 2023 will peak in the second quarter of this year (April to June) at 371,000.

At the last count, the Bank found that the vast majority of borrowers (86%) were on fixed rates.

Karen Noye, mortgage expert at Quilter, said: “Those with a fixed rate mortgage coming to an end this year will likely have been shielded from the rise in interest rates so far as they had locked in at a time when interest rates were below 2%. However, this now means they could be facing a significant increase in their monthly payments when they come to renew, and this could rapidly become unaffordable for many people.”

Payment shock

The ONS found that more than half (57%) of those with deals expiring this year are currently paying less than 2% interest. But they could find that the new deals available to them are closer to 6% – a sharp hike.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “1.4 million mortgage borrowers are in a fix that’ll set them back an extra £250 a month by the end of the year. It means either paying more for years – or reverting to a sky-high SVR while they wait for rates to fall.

“It’s going to come as a particularly unpleasant shock for those currently paying particularly low rates – and people who have borrowed bigger sums of money for more recent purchases. If the rate on a £100,000 repayment mortgage rose from 2% to 6%, monthly costs would rise £220 to £644. With a 300,000 mortgage, they’d rise £661 to £1,933.”

Should you revert to the SVR?

Some borrowers might be reluctant to fix again at such a high rate and be considering automatically reverting to their lender’s standard variable rate. In some cases, this could even be cheaper than taking a fixed rate.

However, Coles cautions: “This is a gamble, because rates are forecast to keep rising in the short term, so those SVRs will get more expensive. Already variable rate mortgages are at their highest in a decade, with some topping 7%, and things could get even more painful.

“If you hang around for too long at this rate, you could end up spending so much over the months that you wipe out any savings from fixed mortgage rates dropping. Your decision whether or not to fix now will depend on how important certainty is to you, and whether you can afford to gamble with something as important as your mortgage.”