Mortgage Rates to Double for Over 800,000 UK Households in 2023

Around 800,000 UK households will see their mortgage rates increase by more than 100% this year as they come off low fixed-rate deals, adding to the financial pressure on many families. This will make it even harder for many people to keep up with their mortgage payments and could lead to more people losing their homes.

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According to an analysis of Bank of England data by the Office for National Statistics, a total of 1.4 million fixed-rate mortgage holders will need to renew their mortgage in 2023. Of these, 57% are currently on deals with interest rates of less than 2%. The average variable rate mortgage is currently 4.41%, while fixed-rate deals start at around 5%.

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If your mortgage deal expires this year, you can expect your monthly payments to increase by £250 ($300). This will put additional financial pressure on those who are already struggling to keep up with rising prices for energy and other essential goods.

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A total of 4 million UK homeowners are exposed to rate rises this year, the BOE said in December. This includes households on variable deals.

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Banks and building societies have raised their mortgage offers because the BOE raised interest rates from 0.1% in December 2021 to 3.5% last month. This was done to tame double-digit inflation. Rates are expected to reach between 4% and 4.5% this year.

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The ONS has warned that the living-standard squeeze may be even harder for private tenants, as rents are currently rising at 4% - the fastest pace since records began in 2016. This is because landlords are passing on higher mortgage costs to tenants.

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According to the ONS, private renters spend on average £106.50 a week on rent, compared with £140.80 for mortgage holders. However, as homeowners tend to be wealthier, the sums amount to 24% of weekly spending for renters and just 16% for mortgagors. For low-income renters, housing accounts for 30% of spending.

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According to the ONS's opinions and lifestyle survey, both renters and mortgage borrowers are finding their housing costs increasingly difficult to service.

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Landlords are particularly exposed to rising rates because the majority are on interest-only deals. More than a third of deals expire in the next two years, at which point landlords will have to choose between increasing rents to cover their costs or selling. This could put pressure on the housing market and cause prices to rise.