Households looking to remortgage could be in for further misery next year as annual mortgage rates are predicted to rise.
According to a think tank, annual mortgage rates are set to rise by £2,900 as the UK’s “mortgage crunch” intensifies.
The Resolution Foundation said total annual mortgage repayments could rise by £15.8bn by 2026.
The Bank of England’s base rate-rising cycle – which started in December 2021 – is expected to continue for longer than originally thought as a result of ongoing inflation.
The foundation said the rates are expected to peak at nearly six percent in mid-2024, in a major dampener for those hoping to get on the housing ladder.
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Those higher expectations are moving through into mortgage rates, with deals being withdrawn from the market and being replaced by higher rates.
Moneyfactscompare.co.uk released data suggesting the average two-year fixed-rate homeowner mortgage was just below the six percent mark, at 5.98 percent.
It is expected that the average two-year fixed-rate mortgage will not fall below 4.5 percent until the end of 2027, the Resolution Foundation said.
They added that this would significantly increase the scale of the mortgage crunch currently unfolding.
At the time of the most recent Monetary Policy Report in early May, there was a projected increase of £12bn.
Annual repayments are now on track to be £15.8bn a year by 2026.
As borrowers move off existing fixed-rate mortgage deals and on to new fixed rates, the report added that around 60 percent of this increase in annual mortgage payments is yet to be passed on to households.
It is also predicted by the foundation that this year’s rate rises are to increase the cost of a typical mortgage by three percent of typical household income this year – even bigger than a 2.4 percent increase seen in 1989.
