Homeowners face nightmare as fixed-rate mortgages end

Martin Shipton

Thousands of homeowners across Wales are facing further financial pressure, as their fixed rate mortgage deals expire.

Analysis by the Labour Party of data from the Financial Conduct Authority shows that 7,962 fixed rate mortgages across Wales will come to an end during January 2024, with the average estimated rise in repayments expected to be £240.

More than 62,000 homeowners will face the cliff-edge of their mortgage deal expiring this year.

Interest rates across the UK have spiked since the inflation-inducing Liz Truss mini-budget of 2022, with rates reaching their highest level since the 2008 global financial crash.

The latest figures reveal that nearly 700 mortgage repossession claims were made in Welsh county courts up to the end of September 2023. The full year figures look set to be the highest since 2019.

This week, Shadow Welsh Secretary Jo Stevens is speaking to voters across north Wales to discuss the impact of the cost of living crisis on families. Labour has pledged a series of measures to help people with mortgage cost uncertainty, including requiring banks to allow lenders to switch to interest-only repayments, extending mortgage repayment periods, the flexibility to switch these measures on and off, extending the repossession period to six months and protecting borrowers’ credit ratings.

Fixed rate mortgages

Shadow Chancellor Rachel Reeves has also promised to explore a shift to 25-year fixed rate mortgages, which are common in the US, Canada and Japan and are less exposed to changes in interest rates.

In November, the Welsh Government introduced Help To Stay Wales, a scheme that helps restructure mortgage payments for homeowners at risk of repossession and homelessness to give them a chance to stay in their homes.

This is on top of the Mortgage Rescue scheme, which has operated since 2008.

Ms Stevens said: “The long shadow of Tory economic mismanagement continues to hammer families across Wales, with thousands facing eye-watering price hikes this month alone.

“People are worse off in almost every measurable way since the Tories first came to power in Westminster because of low growth and spiralling prices. This mortgage bombshell adds insult to injury.

“Building on the support that the Welsh Government is offering mortgage holders, a Labour government in Westminster would require banks to help protect homeowners, and drive the economic growth needed to put more money in people’s pockets.”

Inflation

A HM Treasury spokesman responded: “Interest rates are high across the developed world as economies work to tackle high inflation – the UK is no different. While it is welcome news that we have met the pledge to halve inflation, we know many people are continuing to struggle.

“This is why we are supporting households to the tune of £3,700 each – and encourage anyone struggling with their mortgages to use our Mortgage Charter, which can make it easier to manage monthly repayments and gives extra protections against repossessions.”

The spokesman added: “Interest rates are high across the developed world as economies work to tackle high inflation – the UK is no different.

“The pricing of mortgages is a commercial decision for lenders in which the Government does not intervene.

“The Mortgage Charter sets out the standards signatory lenders will adopt when helping their customers, including new flexibilities permitting customers to switch to an interest only mortgage, or extend their mortgage term for 6 months, and reassurance that borrowers won’t lose their homes within 12 months from a missed payment without their consent or in exceptional circumstances”

All lenders have agreed a series of measures:

* Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file and we would encourage you to contact your bank who are there to help.

* Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.

* Lenders will provide well-timed information to help customers plan ahead should their current rate be due to end.

* Lenders will offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.

The spokesman further added: “The Charter is in addition to the very significant safeguards already in place for consumers in the mortgage market – Financial Conduct Authority rules require lenders to engage individually with their customers who are struggling or who are worried about their payments in order to provide tailored support.

“The Government has also already taken several measures aimed at helping people to avoid repossession, including Support for Mortgage Interest (SMI) loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.”