Around 4 million UK households will face higher mortgage costs in 2023 with average monthly payments expected to increase from £750 to £1,000.
Banks’ lending rates are directly influenced by the Bank of England’s base rate, which rose nine times in the year to December 2022 to 3.5% and is expected to reach around 4.5% in 2023. Mortgage rates are even higher than this base rate because banks add a premium to account for the risk of borrowers not repaying their home loans. Average mortgage rates are now around 6% versus 1.9% in early 2022.
Households with variable-rate mortgages, which adjust as the base rate rises, are already feeling this change. But in 2023 around 1.8 million people with fixed-rate mortgages will come to the end of their current deals. They face an even greater shock because their payments will shoot up almost overnight.
