Mortgage holders hoping for relief on their payments dealt a blow, say experts

Around 1.6 million fixed-rate mortgages are due to end or have already ended at some point in 2024.

Homeowners hoping for some relief for their mortgage payments have been dealt a blow by the base rate being left on hold, experts said
Homeowners hoping for some relief for their mortgage payments have been dealt a blow by the base rate being left on hold, experts said (Yui Mok/PA)

Homeowners hoping for some relief for their mortgage payments have been dealt a blow by the base rate being left on hold, experts have said.

The Bank of England decided to keep the rate unchanged at 5.25% on Thursday, although governor Andrew Bailey said he is “optimistic that things are moving in the right direction”.

Around 1.6 million fixed-rate mortgages are due to end or have already ended at some point in 2024, according to trade association UK Finance.

Some homeowners will be remortgaging onto significantly higher rates, before seeing the base rate start to be cut.

Kate Steere, housing expert at personal finance comparison site said of the decision to hold the base rate: “This will no doubt be a huge blow to borrowers who were hoping for some relief for their mortgage payments, with many big lenders increasing their rates in recent weeks.”

Some commentators also suggested the hold on the base rate may affect sentiment in the housing market.

Mortgage rates have also been edging up in recent weeks.

Figures released by financial information website Moneyfacts on Thursday morning showed the average two-year fixed-rate homeowner mortgage on the market is 5.93%. The average five-year fix is 5.51%.

A week ago, the average two-year fix was 5.91% and the typical five-year fix was 5.49%.

Paul Broadhead, head of mortgage and housing policy at the BSA said: “We still anticipate that the MPC (Bank of England Monetary Policy Committee) will cut rates later this year, and although mortgage rates have ticked up slightly in recent weeks, they remain lower than they were this time last year.

“However, those coming to the end of a fixed-rate mortgage that was agreed before the bank rate started to rise in December 2021 will need to prepare for a significant increase in their mortgage payments.

“Anyone who is concerned that they may experience financial difficulties in the coming months should contact their lender as soon as possible, preferably before missing any payments.”

Andrew Montlake, managing director of Coreo Mortgage Brokers said: “A summer rate cut would provide a welcome tonic to improve sentiment in the housing market and come as a welcome relief to thousands of borrowers.”

The Bank of England will be able to assess upcoming data releases, including inflation and jobs figures, before its next meeting in June.

Matt Smith, Rightmove’s mortgage expert said: “We’d expect that average mortgage rates will begin to trickle down again soon …

“The market is still assuming that the first base rate cut will happen in the summer, and today’s decision is unlikely to change that view. All eyes now turn to the publication of April’s inflation data, which is the next key milestone and is likely to determine the immediate direction of mortgage rates in the UK.”

Laura Suter, director of personal finance at AJ Bell, said: “The real impact of this delay will be felt by homeowners, who will have to endure higher rates for longer. It means more people will come off their cheap mortgage deals and onto higher interest rates before the base rate is cut.

“It also means that those people who gambled on a tracker deal at the start of the year, in the hope of imminent rate cuts, will have to pay their mortgage on higher rates for longer.”

Figures released by UK Finance earlier on Thursday showed 870 homeowner-mortgaged properties were repossessed in the first quarter of 2024, 36% higher than in the previous quarter and 9% higher than the same period a year earlier.

UK Finance said repossession numbers remain very low compared with longer-term norms, but it added that households remain under pressure from the cost of living and higher interest rates.

Jeremy Leaf, a north London estate agent said: “As far as the housing market is concerned, we are finding borrowers increasingly concerned at the uptick in mortgage rates and the delay in what most people expect is a cut in base rate sooner or later.”

Kevin Shaw, national sales managing director, Leaders Romans Group said: “A reduction in rates would have supported economic growth, and hesitancy to lower them might hinder the recovery in the housing market.”

Ben Thompson, deputy chief executive, Mortgage Advice Bureau, said: “Swap rates (which are used by lenders to price mortgages) have been choppy on (Bank of England) expectations, and it’s why some lenders have repriced in recent weeks.”

Myron Jobson, senior personal finance analyst at interactive investor, said: “For now, Britons are still being buffeted by a double whammy of high inflation and high interest rates. With interest rates likely to remain high for some time, debt repayments will be a priority for many.

“The stark reality is even if the (Bank of England) cuts interest rates in the summer, high interest rates aren’t going to disappear overnight.”

He suggested that savers should scour for the best deals before they disappear.

Mr Jobson said: “Savings rates have seen little change in recent weeks, but the overall trend has been downwards since the start of the year in anticipation of the (Bank of England) lowering rates in the future…

“Those who can afford to put money away for at least five years or more should consider investing for the potential of long-term inflation-beating returns.”

Mark Hicks, head of active savings, Hargreaves Lansdown said: “For savers, there are still multiple rates across easy access savings and Isas, and fixed-term products, which pay over 5%.

“However, banks have been slowly reducing the rates on offer in easy-access space, as they start to prepare for a base rate cut later this year.”