Rates and Repayment Lengths Rise
Industry experts now estimate that around 40% of mortgages will go up over the next year, which will force millions into higher monthly payments. Even those currently shielded by a fixed-rate contract aren’t immune; most will end up paying more once their current deal ends.
Indeed, as H2 2021 data show, although 74% of existing mortgage holders are on fixed-rate contracts, half of these will expire in the next 24 months1. Forward planning to find a good deal will become increasingly important if rates keep rising.
Challenges for FTBs (First Time Buyers)
Despite the negativity surrounding rates, however, the Bank of England does not fear a squeeze on households to such an extent as seen during the financial crisis of 2008.
This average term could climb yet higher since the government is pondering ultra-long mortgage deals as a possible way to boost homeownership. Long terms help more people achieve their property goals because a longer mortgage period allows larger sums to be borrowed.
Yet calculations 4 have shown the staggering sums these mortgages could end up costing. For example, with a 75% loan-to-value mortgage, an average house price and an average long-term fixed rate of 6.19%, monthly repayments would stand at £1,140 – which would mean £472,984 paid in interest alone over a 50-year term!
Back to Basics
Getting the right advice is more important than ever – and we’re always here to help. Wherever your property goals take you, we can support you every step of the way.
- Financial Conduct Authority
- UK Finance
- Barrows and Forrester