Recent reports revealed that £30 billion of fixed rate mortgages are due to expire by the end of this month, and with lenders’ interest rates running several percentage points higher than previous years, many homeowners face a drastic increase in their monthly repayments.
On a typical two-year fixed rate mortgage signed in 2006 at a rate of 4.5%, repayments on the following loans would be £277.92 on a £50K loan; £555.83 on a £100K loan; and £1111.67 on a £200K loan. On a typical rate of 7.1% today, however, monthly repayments would increase to: £356.58 on the £50K loan; £713.17 on the £100K loan; and £1426.34 on the £200K loan.
Ian Wright, managing director of newtomorrow.com, said: “Few people are actually aware that even a half or quarter per cent of an increase in interest rates can translate to £50 less in their pocket each month, so for the rate to jump up by 2% or 3% overnight is going to come as a big shock. The rates we’ve quoted are fairly typical of the current market, and whilst they represent a rise of 2.6%, this equates to a 65% increase in the interest payments.”
