Millions of homeowners are facing a financial headache as their fixed-rate mortgages come to an end.
Around 1.5 million homeowners are expected to remortgage during 2024, and many will be hit with much higher monthly repayments.
This is according to financial experts Hargreaves Lansdown, who warn that many borrowers are facing a struggle to make ends meet.
Their research shows that 18% of those who have already remortgaged since the end of 2022 are struggling with their finances, compared to 12% of those yet to face higher rates.
Remortgaging Nightmare Sees Homeowners £95 Worse Off
The average homeowner who has remortgaged has just £315 left at the end of the month, £95 less than those yet to refinance.
This is largely down to the fact that many homeowners are coming off fixed-rate deals that were agreed when interest rates were much lower.
For example, the average two-year fixed-rate mortgage in June and July 2023 was just under 6%, according to Moneyfacts. This is significantly higher than the rates many homeowners will have secured before interest rates began to rise.
Painful Rate Jumps but Some Hope On the Horizon
Sarah Coles, head of personal finance at Hargreaves Lansdown, says that while the jump in rates is going to be painful, there is some hope for those remortgaging in the coming months.
She explains: “Those who remortgage in the next six months or so are likely to be moving from a rate of 2% to 2.5% to one that’s currently closing in on 5%.
“It means the jump in rates is going to be painful, but they don’t have quite the same gap to clear as those who came before them – who faced a rise from less than 2% to more than 6.5% in some instances.”
Homeowners in a “Reasonably Strong Position”
Despite the challenges, Coles highlights that homeowners are generally in a good position to weather the storm:
“It’s also worth highlighting that those who own with a mortgage tend to be in a reasonably strong position overall. Around three quarters have enough emergency savings (73%) and more than half (57%) have enough money left at the end of the month to be resilient. It puts them in a better position to withstand the blow.”