Increases in mortgage payments of up to 33 per cent are feared for the 287,000 households which will reach the end of their fixed rate mortgage between now and December 2007.
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CACIs analysis of the total UK mortgage market shows that fixed rate mortgages hit their lowest point in December 2005. During this time, average mortgage rates fell to 4.7 per cent, with deals as low as 4.4 per cent available.
With widespread speculation of a further quarter point interest rate rise before the end of the year, the best fixed rate mortgages likely to be available in December 2007 will be 6.25 per cent. This would mean an increase in mortgage payments of up to 33 per cent for borrowers reaching the end of their fixed rate term at this time.
A further 320,000 households will reach the end of their fixed term between January and August 2008. These homeowners are likely to face similar, and potentially higher, mortgage increases if interest rates continue to rise.
Penny Dryden, Director, CACI said: “Homeownership is such a big priority in the UK that people have stretched themselves financially to get on the housing ladder, or to upgrade to a larger home or more desirable area.
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“A small but significant proportion of the market will be affected by households coming to the end of their fixed rate term. However, if, as suggested, interest rates rise significantly over the next 12-18 months, the problems we are seeing now could be much worse in the years ahead.”
The CACI Mortgage Market Database shows that some regions of the UK will be harder hit than others. Towns including Kingston upon Thames, Guildford and Twickenham have a very high proportion of people on fixed rate mortgages who have borrowed over 85 per cent of their propertys value.
In contrast, in towns and cities including Bradford, Swansea and Sunderland, those with fixed rate mortgages have typically borrowed a lower proportion of their propertys value. Average house prices are also significantly lower.
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Of the towns and cities hardest hit by the recent floods, Oxford looks likely to suffer the most and experience the largest increases in mortgage payments. Its average mortgage loan to house value ratio for borrowers with fixed rate mortgages terminating between October 2007 and March 2008 is 83.14 per cent.
The research also shows that households which are financially better off are likely to be hardest hit when they reach the end of their term. These groups were more likely to take out a fixed rate mortgage under five per cent than less well off households.
Dryden said: “With many regions facing large clean-up costs and increased housing insurance premiums as a result of the recent floods, budgets will need to go a lot further. This could be a difficult year ahead for the British public and consumers need to start tightening their belts.
“We all now need to take a hard look at the impact that further interest rate rises will have on our finances and start saving now.”
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