Money man Martin Lewis has admitted that homeowners who are coming off their fixed-rate mortgage will see huge price hikes on their monthly mortgage payments.
The Bank of England yesterday announced that some four million households across the United Kingdom will face payment surges, with interest rates expected to rise once more.
Analysts anticipate that the Bank will hike base rates from 3 per cent to 3.5 per cent tomorrow - with Martin taking to ITV to discuss what the percentage point change could mean for homeowners.
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The Mirror reports that speaking on Good Morning Britain, the MoneySavingExpert founder estimated exactly how much more borrowers are likely to pay back. He said: "Roughly, anybody coming off a cheap fix, at the moment will likely pay around 3 per cent more than they were paying that equates to £160 per month, per £100,000 of mortgage.
“We’re expecting an interest rate decision this week. The prediction is that interest rates are going to go up by 3% to 3.5%, it’s likely to be in that realm."
The financial buff then explained that higher fixed-rate mortgages may be the new norm, amid the ongoing cost of living crisis. He continued: "Fixed-rate mortgages tend to move more with the long-term predictions of interest rates.
“When we had the calamitous mini budget, the prediction was that interest rates would be peaking at around 6 per cent next year. The current prediction is that interest rates will be peaking at 4.5 to 4.75 per cent.
"This means if you have a fixed rate now, compared to two months ago, it’s cheaper."
However, Martin also warned not to assume that interest rates could plummet further, adding: "Since 2007 we have had incredibly low interest rates, but it is perfectly possible that the 2007-2022 period is an anomaly. Don't make any assumptions that interest rates could go down to the cheaper rates we used to have, as 4.5 to 4.75 per cent could be the new normality."
Just last week, Martin attended the mortgage summit which was called by Chancellor Jeremy Hunt, where ways of softening the landing on accelerating rates were suggested. He said: "Most of what I was suggesting was on flexibility and forbearance.
"Next spring energy prices are going up, food prices will likely be up on where they are now."
In terms of mortgage rates, Martin continued: "Standard variable rates will likely be higher than they are now. If you’re struggling, go to your mortgage company, talk to them.
"Take a payment holiday, extend your term, shift to interest only. The problem for me, is they’re often not reversible, and people often don’t do them because they’re not reversible and they impact their credit file."
Martin also spoke about how he suggested ways to ease fears with regards to short-term action to allow people over the hump - also noting that the ability to change back is there, so credit files aren't damaged in an unnecessary manner.
He continued: "Unless you let people know that the flexibility available is there, and it’s not going to give them a long-term negative consequences, they won't take that and they might struggle - and that could end up being catastrophic."
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