Homeowners facing ‘Christmas mortgage crisis’ - warning

Around half a million mortgage-holders are facing an imminent financial shock as their fixed deals end in the run-up to Christmas or January, the most expensive time of the year for many consumers, Which? has warned.

The consumer watchdog has analysed figures from regulator the Financial Conduct Authority (FCA), showing that around 480,000 fixed-rate mortgages will come to an end in November, December or January.

As a result of higher interest rates, most affected homeowners moving onto new deals will have to pay hundreds of pounds more each month compared to their previous deal. 

Data from Moneyfacts shows that the market-leading two-year fixed-rate mortgage is currently 5.53%, from Coventry Building Society. Earlier this year, the average rate for this type of mortgage went above 6%, yet those who fixed their deal in December 2021 could have got rates below 2%.

The average mortgage holder has £147,000 left to pay off, according to the FCA. In September 2021, someone taking out a two-year fix with 20 years left on their loan would, on average, have paid £770 a month. However, someone in that same scenario today would be paying £1,106 a month - a £336 difference, which equates to £4,032 extra annually.

Data from the FCA also suggests another spike in mortgage deals coming to an end next Spring, with more than 180,000 homeowners set to come off fixed-term rates in April.

With average rates for both two and five-year mortgage deals hovering around 6% and many experts predicting the fifteenth successive Bank of England rate rise tomorrow, it is unlikely that homeowners whose deals are ending in the coming months will be able to find deals at anywhere near the rate they have been previously paying, Which? said.

The consumer champion is calling on banks to ensure they are ready to provide appropriate support to customers. That means firms are ensuring that their customer service support - via phone calls, email and chat support - is properly staffed and resourced, including during the Christmas holiday period. 

Ele Clark, senior money editor at Which?, said: “The rock-bottom interest rates homeowners enjoyed for more than a decade are firmly behind us, and those who need to remortgage are feeling the full force of the last two years’ worth of rate rises. 

“With more than half a million mortgage-holders’ fixed-rate deals coming to an end in the next few months, it’s vital that lenders are offering adequate and fully resourced customer support to help borrowers assess their options. 

“Under the new Consumer Duty, firms must support their customers throughout the term of their mortgage. If they don’t, we’d expect them to face tough action from the regulator.” 

Commenting on the research, Eric Leenders, managing director of personal finance at banking trade body UK Finance, said: “Christmas can really stretch household finances. All lenders have teams of experts ready to help anyone who is worried about their mortgage and, as usual, there will be a moratorium on possessions to ensure that people stay in their homes over the festive period.

“Reach out to your lender if you are struggling with your finances – there’s a range of support available that your lender will tailor for your specific circumstances. 47 lenders representing over 90 per cent of the market have also signed up to the government’s new mortgage charter, providing even more help for borrowers when they need it.”