The warning has been issued to homeowners of upcoming repayments that are likened to a “ticking time bomb.” Many could be facing interest rate payments possible of doubling each month according to research. The Liberal Democrats have released data analysis confirming that mortgage holders will be facing the largest increase in interest payments ever on record. The warning leaves little in way of preparing or finding a solution, but a remortgage could be quite helpful to homeowners seeking to defuse the bomb.

A statement by Liberal Democrat Treasury spokesperson Sarah Olney referred to the warning, “Homeowners are paying the price for the Conservative Government crashing the economy. The mortgage ticking time bomb has only seconds left. The coming months will see mortgage payments implode, leaving families paying hundreds of pounds more a month.

“This is simply unmanageable with the tax rises announced by the Chancellor. This was the cost of chaos budget where everyone pays the price. It is becoming clearer by the day that families who own a home will pay the ultimate price for months of chaos. Something has to give.”

The data analysis gave an example of a mortgage value of £236,000 seeing monthly repayments increasing from £236 to £474, which is an extra £2,851 per year out of a household budget already reeling from the demands of a 40-year high inflation rate.

Their analysis is based on the recent forecast from the Office for Budget Responsibility (OBR) revealing mortgage interest payments will realize an annual increase to September 2023 of 100.5%. The previous increase record was in 1989 with 63.6% rise.

The Bank of England has been fighting fast growing inflation and since December of last year the Monetary Policy Committee (MPC) has increased the standard base interest rate during the last eight consecutive meetings. The rate has risen from an all-time historic low of 0.1% in December 2021 to a current 3.0%.

With each rate hike, if a homeowner has their mortgage attached to a tracker interest rate or a variable rate then they are facing ever increasing repayments as their interest rate rises.

To escape the increases and build a shield from further rate hikes, a homeowner could remortgage to a fixed rate deal. The interest rate is locked in for the duration of the term and will not rise despite any decisions to increase the base rate by the MPC.

There will be another meeting of the MPC in December and a possible 0.5% or more increase is expected. This would take the base rate to at least 3.5%. Lender rates could rise to an average 7.0%. The forecast is for the MPC to take the base rate to 5.0% or higher next year in the fight against inflation growth.

Even those homeowners already on a fixed rate should take notice of the current increases in the Bank’s rate. Their term could be coming to an end and when it does, they will likely face very different offers than when they previously obtained their current rate deal.

Homeowners seeking to escape the possibility of higher rates when their term is due to end are choosing to take on a penalty fee to end their term early and allow remortgaging with current rates. Making such a decision isn’t for every homeowner, but gathering quotes for possible remortgage offers will help in developing the best strategy to escape paying more than necessary when every savings opportunity could make a major difference.

Getting remortgage quotes is easy to do online. Most remortgage brokers will offer online quick quotes from a variety of lenders in a one-stop shopping experience. A few minutes online will put quotes in hand to review and compare to find the best remortgage deal. Remortgage brokers could also have exclusive deals from lenders not offered directly to homeowners.

Going from remortgage lender to remortgage lender website is also a way to obtain quotes to compare. It should be noted that it is always a good strategy to push loyalty to one’s current lender aside and shop remortgage offers from other sources. Doing so could find a deal that saves more than the current lender is offering. 

A time bomb warning is nothing to overlook, but it isn’t a shut and close case that a homeowner must endure the financial strains. There could be opportunities available to defuse the situation such as remortgaging to avoid the financial impacts and build a safety net to endure the many more interest rate hikes expected ahead.