Property experts say an emergency interest rate hike is ‘almost guaranteed’ after Chancellor Kwasi Kwarteng’s tax cuts sent the pound plummeting to record lows.
Mark Dyason of Edinburgh Mortgage Advice, a broker, said: ‘By reducing stamp duty, the Chancellor has scared the property markets to such an extent that, for landlords, the savings made from the tax cut will not will not offset the amount of their mortgage. by.
If mortgage rates hit 4% next year, someone coming to the end of a fixed rate deal with a £250,000 mortgage over a 25-year term could pay an extra £250 a month next year , according to Mr Dyason – an annual increase of £3,000.
But if the Bank of England raises rates by 0.75% this week – which many believe it will – mortgage rates could top 6% in 2023 and the same borrower would be paying £1,611 a month, meaning that his mortgage would be 50% more expensive.
Almost two million homeowners have entered into a fixed rate agreement which will expire next year, according to UK Finance.
Some of them might be able to soften the blow by locking in today’s rate for next year’s deal.
Many homeowners for whom this is not an option consider paying the mortgage prepayment charge.
Mr Dyason said for many it would not be profitable, but that could be about to change: “If the bank rate goes up this week, it could be worth considering a new mortgage and paying the prepayment charges,” he said.