Fears mortgage rates could leap to 7% interest when homeowners’ current deals end

Hundreds of thousands of homeowners could be faced with mortgage rates of up to 7 per cent interest when their current deal comes to an end this year.

Around 800,000 homeowners need to remortgage in the next six months but could face rates almost three times higher than when they secured their original deal.

It comes amid fears the Bank of England will continue upping rates, after it voted to increase its rate for the 13th time in just 18 months yesterday, to a 15-year high of 5 per cent. 

Markets were yesterday betting on the Bank raising rates to 6 per cent by November – and for them to remain at that level well into next year, as far as May.

Luke Hickmore, director at investment company Abrdn, said: ‘If we get to a 6 per cent base rate by the end of the year, that implies considerably higher fixes as they go through the autumn.

Around 800,000 homeowners need to remortgage in the next six months (File photo: Terraced homes in Crewe, England) 

‘Rates could even touch 7 per cent for a two-year fix.’

More than a million homeowners will run out of savings due to higher mortgage repayments, making around 30 per cent of households insolvent, according to the National Institute of Economic and Social Research.

More than 300,000 of those due to secure a new deal won their original rates in the second half of 2021, when the average two-year fix was around 2.2 per cent.

A homeowner with a mortgage of £300,000 would have to pay £19,680 more over two years than they would have done on their original rate, according to L&C.

Yesterday Virgin, Santander and Barclays all upped their SVR deals to reflect the rise in the base rate.