Thousands on low-rate mortgages face £300 increase in monthly payments

Thousands face a £3,000 'timebomb' this month even if interest rates fall. Around 1.8 million mortgages will be up for renewal this year, analysis shows, and for around 50,000 homeowners who secured low-rate mortgages in early 2020, this shift could mean a nearly £300 increase in monthly payments—pushing their costs up by over £3,000 annually this month.

Homeowners coming off five-year fixed deals will see their monthly payments rise from £836.07 to £1,111.66 on a typical £200,000 mortgage, according to analysis by household money-saving tool Nous.co. Greg Marsh household finance expert and CEO of money-saving tool Nous said: "Falling interest rates are welcome news for mortgage holders. But the UK’s mortgage timebomb hasn’t fully exploded.

"Millions of households are still on mortgage rates below three per cent and will see their monthly payments soar when they refinance over the next three years. In February alone, 50,000 households are coming off five-year mortgages and facing painfully high rates for the first time.

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"A typical household will see their payments rise by nearly £300 a month. After years of soaring prices, many will struggle to manage." Jonny Stevens, who runs a communications business in Bath, said: “The idea behind interest-only would be that it still allows us to make overpayments. We wouldn’t just sit on an interest-only for five years, we’d try to overpay where we can.

"I'm going to cut back on things. I'm shopping around to get the best deal for everything, and also trying to earn more money. I can’t transfer my kids to state schools because they’re all full. I might not get much sympathy but I'm not some rich, privileged guy. I've worked hard all my life."

Editor-in-Chief of TopMoneyCompare, Russell Gous said: "With a cut to 4.5% widely expected, a surprise decision to hold rates at 4.75% would likely rattle markets. Experts estimate the chances of a cut at around 90%, expecting an 8-1 decision in favour. So a decision to stick at 4.75% would come as a real shock - but it’s not impossible. Inflation did fall in December, but it’s still stubbornly above the 2% target, and concerns of exacerbating inflationary pressures could influence a hawkish response.

"Major mortgage lenders have already started reducing rates in anticipation of a cut, and an unexpected hold could force them to reassess their pricing. This could create uncertainty for borrowers, particularly those looking to secure new deals in the coming weeks."