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Dashly: average new mortgage payment set to rise by £288

ended 16. August 2023

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."

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8 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
These are not unexpected figures, considering many borrowers throughout this year are coming off sub-2% deals. 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. Arrears have certainly been prickly this year, and I expect that to continue as borrowers try and adjust to a higher rate arena. That said, the borrowers I'm talking to are resilient and are or have made some serious adjustments already to their general living expenses to keep the roof over their heads. So there's not quite been a stampede of downsizing... yet.
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Justin Moy
Managing Director at EHF Mortgages
With over 1.5 million mortgage renewals due between now and the end of 2024, this data just confirms the sheer magnitute of the effect of mortgage rate increases this past 12 months or so. 2024 will be a significant challenge in particular, as payment shock finally sets in for the majority of borrowers. Rather than seeing significant volumes of property sales and downsizing, there could be more help from the Bank of Mum & Dad, who invested in many of the purchases in recent years and will want to protect this family investment. Also, other significant outgoings will be tempered, for example, the car industry may see a slowdown in new car sales and other discretionary spending will suffer, such as holidays. We all hope this is a short-term problem, and many will look to dig in and ride out the storm before they sell up.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The Bank of England has expected a small proportion of mortgage holders on variable rates to reign in the UK economy and drive down inflation over the last year. It clearly hasn't worked, but it will create a huge shock for those coming off fixed rates over the coming 12 months. Ironically, inflation will already have been falling back in line with government targets by that point, so the pain set to be inflicted on these homeowners is totally unnecessary and will be the catalyst for a recession and house price correction.
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Elliott Culley
Director at Switch Mortgage Finance
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.
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Lee Gathercole
Co-Founder at Rebus Financial Services
As the data suggests, there is a considerable amount of homeowners that have been used to record low-interest rates over the past 3-5 years and we are already starting to have very difficult conversations with mortgage holders regarding their new monthly payments now that their mortgage is up for renewal. 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.
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Graham Cox
Director at Bridging Hub
It doesn't take Einstein to realise how bad this is not just for people's pockets, but the economy in general. The great folly of ever-increasing house prices is that it takes ever-increasing amounts of borrowing and thus less money is available to spend on the high street. We could get away with it when interest rates were near zero, but no longer. The only thing that can give now is house prices, which are falling and are likely to continue falling for at least another year, maybe two.
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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
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. While some, buoyed by salary hikes, can weather this storm without a financial overhaul, others are grappling with the added strain on their household income. In this challenging scenario, the latter group predominantly are opting to tough it out, recalibrate their lifestyles and endure the sting of amplified mortgage payments rather than throwing in the towel. Despite the present higher costs, the majority of borrowers are gravitating toward the briefer 2 or 3-year fixed deals for their fresh mortgages, banking on a future where reduced rates might ease the weight of escalated payments during their next evaluation. Hopefully, with inflation's grip gradually loosening, the impending months could potentially witness a milder shock in payments for borrowers.
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James Miles
Director - Mortgage Adviser at The Mortgage Quarter
We already know borrowers are being hit hard with rate rises and will need to cut their cloth accordingly. We’ll see cut-backs across all spending, which will have a negative impact on many sectors and ultimately see inflation drop and you’ll see more companies go out of business. For many borrowers, it will be key to look at extending their mortgage terms, consider interest-only borrowing or, if they're able to, reduce borrowing amounts to ensure their homes are still affordable.