700,000 homeowners face a mortgage increase when their fixed-rate deals end this year. 700,000 homeowners are facing an increase as a sell-off in the Labour Party government debt market plunges the financial markets into turmoil.
The turmoil threatens to push up household borrowing costs. Higher interest rates will add £1.27bn to the annual housing costs for property owners remortgaging in 2025, according to research by the property company Savills reported by the Financial Times.
Lucian Cook, the head of residential research at Savills, said to the FT on Friday (January 10) the “pressure on household finances” from rising mortgage costs “has the impact of continuing to suck money out of the economy”.
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Simon Gammon, managing partner at Knight Frank Finance, said: “Swaps have moved materially so pricing pressure is already there for all lenders . . . if the current trend continues with swaps remaining high, we will probably see mortgage rates move higher across the board.”
The Bank of England, which last year started to cut its benchmark interest rate from a 16-year high, has warned that the “full impact of higher interest rates has not yet passed through to all mortgagors”. Cook at Savills said that “only when this has fully washed through . . . will you see people think again about moving”.
Five-year swap rates have risen from 3.8 per cent to 4.12 per cent, while two-year swaps have increased to 4.26 per cent from four per cent since early December. Yesterday alone saw five-year swaps jump by 0.14 percentage points in a single day.
This means that the lowest fixed rate mortgages are currently below their equivalent swaps. The lowest five-year fixed rate mortgage currently pays 4.07 per cent and the lowest two-year fixed rate is 4.16 per cent, mortgage borrowers have also been told.