Fixed Rate Borrowers Face Remortgaging Shock
by Gill Montia
Story link: Fixed Rate Borrowers Face Remortgaging Shock
Yesterday’s base rate increase to 5.75% has been followed by a number of bodies voicing concerns about the number of fixed-rate mortgages about to come to and end and the pressures that will be put on homeowners when they come to re-arrange their borrowing.
During 2005, when interest rates fell to 4.5%, fixed-rate mortgages became highly popular but over two million are now approaching the end of their terms, leaving borrowers to deal with the financial impact of the five interest rate rises since the mortgages were taken out.
According to the Royal Institute of Chartered Surveyors, someone with a Â£100,000 mortgage on a two-year fixed rate agreement can expect to face an increase in monthly payments of approximately Â£100.
At the same time property price inflation has meant that the size of the average mortgage has steadily increased and the Council of Mortgage Lenders estimates that currently UK homeowners are spending more of their income on mortgage payments than at any time in the past 15 years.
There is evidence to suggest that the UK economy can sustain higher borrowing costs; house prices are still rising, unemployment is low and in the corporate sector, record profits are being made.
However, some economists believe that the popularity of the fixed-rate mortgage could result in a time-lag before the effects of the latest base-rate increase it are seen.