Mortgage payments to rise by £240 a month despite interest rate drop

12/12/2023

Homeowners are being warned that 900,000 households will see their mortgage payments rise by around £240 a month.

This is despite signs that lenders are apparently reducing mortgage rates after a period of constant hikes.

Interest rates have been high over the last two years as central banks have attempted to deal with inflation.

Recently, Uswitch.com analysed the various interest rate reductions among major banks and building societies.

These included Nationwide Building Society, Santander, HSBC, Halifax, Barclays Bank, NatWest and Lloyds Bank

Read more… Homeowners to face high interest rates for foreseeable future, experts warn

Martin Lewis speaks on loans and mortgages

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Here is a breakdown of the mortgage rate changes among the country’s six biggest lenders.

	Rates (12th December)	% change from 5th Dec	% change from 14th Nov
Two-year fixed-rate mortgage (75% LTV)	5.22%	-0.1%	-0.31%
Five-year fixed-rate mortgage rate (75% LTV)	4.81%	-0.03%	-0.14%
Two-year variable-rate mortgage rate (75% LTV)	5.74%	–	–
Two-year fixed-rate mortgage (90% LTV)	5.79%	-0.05%	-0.175%
Standard variable rate (SVR)	7.5%	–	-0.49%

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Despite this, the Bank of England’s latest Financial Stability report has warned that 900,000 borrowers are in line to experience a mortgage shock.

With rates at their current level, thousands of households will be levied with sharp increases in mortgage repayments.

While the average household will see payments jump by £240 a month, many could see the amount go up even further.

Kellie Steed, Uswitch’s mortgage expert, cautioned homeowners of the likelihood of more money coming out of their wallets even with interest rates falling.

She explained: “Despite the continued downward trend in mortgage rates following the 15 continuous base rate hikes seen up until September, those customers who are still yet to remortgage from their much cheaper previous deals are still in for a large increase in repayments.

“With many still due to come out of two, and five-year fixes that were taken at a time where average mortgage rates were much lower, The Bank of England’s latest Financial Stability report has forecast that around 900,000 borrowers will experience mortgage shock.

“They warn of monthly mortgage payment increases of around £240 on average – but 20 percent of those borrowers will see more than £1,000 rise in their costs.”

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