People renewing their mortgage over the next 12 months will be on average £3,456 worse off each year

New data from Dashly, the mortgage insight experts that monitor over £100 billion of mortgages, shows that people renewing their mortgage over the next 12 months will be, on average, £3,456 worse off each year.

Based on a sample of 75,000 owner-occupier and buy-to-let mortgages with initial rates expiring between Aug 23 and July 24, and assuming borrowers switch to the best available rate instead of lapsing onto their SVR, Dashly’s 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 compared to the current average deal secured during a period of historically low rates.

The result is an average increase in mortgage payments of £3,456 per year, which equates to a 38.6% rise. The average mortgage rate, according to Dashly, will rise from 2.29% to 5.23%.

Brokers confirmed the pain ahead, with one, Lewis Shaw, founder of Mansfield-based Shaw Financial Services, saying: “2024 will be the year of the remortgage, and given current market predictions, it will be absolutely brutal.”

Elliott Culley, director at Hayling Island-based Switch Mortgage Finance, agreed: “This data reinforces what we are already seeing on the front line. Borrowers are looking into how they can mitigate the rise in mortgage costs. 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.”

Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions, underlined the crisis ahead: “Unquestionably, those emerging from their initial 2, 3 or 5-year fixed-rate deals are confronting a harsh reality, typically a staggering surge of at least a third in their monthly mortgage obligations.”

Meanwhile, Darryl Dhoffer, founder of Bedford-based The Mortgage Expert, said some borrowers will be affected more than others: “For many, a sharp increase in their mortgage payments is inevitable. Let’s not forget these are average figures, so borrowers with lower average mortgage balances will be less impacted than those with much higher above-average mortgage balances.”

Lee Gathercole, co-founder at Peterborough-based Rebus Financial Services, drove home the affordability impact on existing borrowers of 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.

“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.”