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Payment shock prospect for 1.3m borrowers with deals ending this year

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
05/07/2022

If your current deal is ending this year, moving onto a new rate is likely to be more expensive, but not as pricey as doing nothing at all

Over a million (1.3 million) customers are set to reach the end of their fixed rate deals this year, according to UK Finance.

If you don’t remortgage at the end of a fixed rate, you’ll automatically move onto your lender’s standard variable rate (SVR), which will typically be more expensive than what you’ve been paying.

But even remortgaging to a new fixed rate deal could mean higher monthly mortgage repayments for many, said the trade association in its Trends in the Economy and Lending report for June 2022.

That’s because the Bank of England has raised wider interest rates this year, which means new mortgage deals have become more expensive too.

Drop in disposable income

UK Finance estimates that, on average, the combined impact of cost-of-living rises and remortgaging onto a new deal will result in around a seven per cent decrease in borrowers’ free disposable income.

In fact, it found that nine per cent of the 1.3 million borrowers coming to the end of their fixed deal in 2022 will see their disposable income after cost-of-living increases and refinancing constrained to less than ten per cent.

Limited refinance options

Some borrowers’ remortgage options may be limited due to higher new mortgage rates and lenders looking closely at borrowers’ outgoings in the content of rising prices.

However, even if you are not eligible for a remortgage with a new lender you should still be able to take a competitively priced product transfer (to a new fixed rate deal, for example) with your existing lender.

It might be more expensive than your current rate, but it’s still likely to be less expensive than doing nothing at all and automatically moving onto your lender’s standard variable rate.

UK Finance added that three quarters of mortgage customers, including almost all recent borrowers, are on fixed rates.