Mortgage lenders are being urged to slash crippling early exit fees on fixed rate loans as millions of borrowers face massive increases in their monthly repayments because of soaring interest rates. Home-owners whose fixed interest deals are due to expire in the next year face the prospect of having to pay almost double every month when they end, but cannot renegotiate those deals because of whopping exit fees.
Calls for lenders to reduce or scrap these come as the Bank of England put up lending base rates to 1.75 per cent and some experts predict that mortgage interest rates could hit 7 percent in the next two years.
Greg Marsh, CEO and founder of cost-of-living champions nous.co, said: “This is a ticking time bomb for hundreds of thousands of families in the UK. The banks can’t just ignore the current crisis. They must relax their rules now to avoid the disastrous consequences their customers are facing through no fault of their own.”
As many as 4million families in Britain are thought to be on fixed rate deals which expire in the next 12 months. That rises to almost 6million if for those whose deals end in the next 18 months. A two per cent rise in the interest rate on a 90 per cent mortgage at today’s average house price of almost £300,000 would add an extra £310 to the monthly repayments, or £3,720 a year - an increase of around 25 per cent.
That is more than the predicted increase in energy costs, which the government has activated some payments to help towards. Mum-of-two Lydia Joseph says: “I can’t sleep at night worrying how I will pay the mortgage when my fixed deal ends next year. The repayments then are likely to rise to more than half my take-home pay – or even more if interest rates go through the roof.
“I could get out of my current deal and lock into a new one now that I can afford, but my current lenders are demanding £12,000 for me to switch. I feel I and many thousands like me are being held hostage by the banks."
Researcher Lydia, 43, is paying £1,718 a month on a 28yr mortgage she and husband Paul have on their home in Faversham, Kent, that she bought for £485,000 in 2020. Her three-year fixed deal at 2.08 per cent expires in April next year. She added: “I can currently get a seven-year fixed deal at 2.7 per cent but there’s literally no way for me to extricate myself from my current arrangement without shelling out £12,000k in fees upfront.
“That would wipe out all our savings overnight. The whole thing feels like I’m facing down the barrel of a gun. But if I don’t forfeit £12k now, my monthly mortgage payments next year could be more than half my household take-home pay.
“That’s before bills, groceries, petrol – anything. Which is absolutely insane. In the meantime, we’ve cut back on anything we weren’t already committed to and now track all our spending obsessively.
“In these times, I think it’s pretty unscrupulous of banks to hold customers to these fees. Anyone who took out a product two or three years ago could have had no inkling of what was about to happen to inflation and interest rates.
“Now we’re all going to be bankrupted by something we can all see coming but can do nothing to avoid, unless we’re prepared to pay out the price of a house deposit again, just to get out of our existing arrangement.
“I earn a higher than average wage but we don’t live in a mansion, just a four-bed new-build on an estate. I am losing sleep over the worry of this, so heaven knows how others less fortunate are coping.
“I realise I am lucky. I have a small amount of savings and a well-paid job that allows me to pay an exit fee, even if we clean ourselves out by doing it. Many thousands of families don’t have that luxury.
“These are extenuating circumstances that are going to see lots of people go to the wall by this time next year, and yet there’s seemingly no mechanism that would force banks to at least reduce these charges or cap the amount that people should have to pay in order to be able to save their skins.”
Nous.co CEO Greg Marsh added: “This goes to show how even the most prudent of people can get into difficulty when hit by an unexpected financial crisis like the one we are facing now.
“Let’s face it, this situation has not really come up in the past two decades because we’ve had falling or very low interest rates.
“Lenders can and must do whatever they can to help, because the last thing they need is a flood of damaging and expensive repossessions because borrowers can’t afford the new repayments.
“At the same time it is vital for everyone to be on top of their outgoings in these difficult times. We're proud to be providing a service to help households keep track of their finances, enabling them to get the best deal on everything they can."
