Homeowners hit hard as mortgage rates soar to near 7% in 2024
Mortgage rates have surged in recent months, leaving thousands of homeowners facing sharply higher repayments. Those who locked in cheap deals in 2021 are now remortgaging at rates more than double their original agreements. Rising inflation, high government borrowing, and tighter lending rules have all pushed costs upwards.
The problem began in late 2022 as market instability and Bank of England rate hikes sent mortgage costs climbing. By July 2023, average two-year fixed-rate deals hit 6.86%, while five-year deals peaked at 6.51% in October 2022. Around 69,000 households had secured five-year fixed-rate mortgages in January 2021 at rates below 2%. Now, as these deals expire, borrowers face average rates of 4.9%—far above their original 1.88%.
Higher inflation has worsened the situation. In Germany, rising food prices, energy costs, and health insurance contributions have kept inflation stubbornly high, with the core rate at 2.8% in September. Investors, wary of low-yield government bonds, have sold them off, pushing bond yields up and mortgage rates with them. Banks have responded by demanding more equity and enforcing stricter lending rules.
For a typical £200,000 mortgage, monthly repayments could jump from £836 to £1,157, costing borrowers an extra £3,852 per year. Those who stay on their lender’s standard variable rate could face even steeper increases, with rates potentially exceeding 7%. However, borrowers with strong credit scores and higher equity can still find deals as low as 3.7% by shopping around and switching lenders.
The sharp rise in mortgage rates means many homeowners will see their repayments increase significantly when remortgaging. While some can still secure lower rates by comparing deals, others may struggle with the higher costs. The combination of inflation, bond market shifts, and stricter lending rules continues to shape the mortgage landscape.
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