Homeowners renewing their mortgages over the next 12 months will be an average of almost £3,500 worse off per year, due to the rise in interest rates, leading some to take the decision to downsize to a more affordable home.
For many on three- and five-year fixes who have not already switched, their monthly payments will increase by at least a third.
The analysis was made by financial comparison site Dashly from examining the terms of 75,000 mortgages where current fixed deals will be expiring between August 2023 and July 2024.
It looked at both owner-occupier and buy-to-let mortgages, and made the assumption that borrowers switch to the best available rate instead of lapsing onto their standard variable rate.
The analysis found that the average monthly mortgage payment is set to rise from £747 to £1035 as the remortgage crunch takes hold — an increase of £288 per month that equals £3,456 over a year.
Mortgage brokers said this is what they were seeing on the 'front line' too.
Elliott Culley, director at Switch Mortgage Finance in Hampshire, told Newspage: “It's a tough market right now and tough decisions are being made as people change their short-term plans to stay on top of rising mortgage costs. Some will have to take the decision to downsize and some are trying to prepare for the inevitable increase in costs by reducing their overall mortgage balance before their rate rises.”
Some borrowers will be affected a lot more than others, such as borrowers with higher mortgage balances.
And not all home owners will be able to switch to a new lender, due to affordability impact in the new rate environment.
"Some of them are left with no choice but to remain with their existing lender as they no longer fit affordability rules with other banks, even though this may not be the most cost-effective option," said Lee Gathercole at Rebus Financial Services in Peterborough.
"We are starting to see more borrowers amending their mortgage features, such as increasing their mortgage term, or considering part and part or interest-only mortgages to help cushion the blow. Unfortunately, there has been a minority of people that have now considered selling and downsizing or moving back in with their parents and letting their home out. That's how tough the remortgage crunch is proving."