More than 1.4 million UK households face the prospect of interest rate rises when they renew their fixed-rate mortgages in 2023, says the Office for National Statistics.  

The majority of fixed-rate offers in the country, or 57% of these types of loans, coming up for renewal in 2023 were fixed at interest rates below 2%, says the government department drawing on Census 2021 data.  

It adds that deals that are due to mature through the course of 2024 will be from two-year fixed-rate offers made in 2022 and five-year fixed-rate deals made in 2019, when mortgage rates were generally higher than 2%.   

Last week, the average two-year fixed-rate mortgage was 5.75%, according to Moneyfacts, with inflation at 10.7%, however, last January the average two-year fixed rate was 2.38% with inflation at 5.4%, following a 12-month period that included nine successive interest rate rises.   

The Bank of England lifted interest rates from 0.25% at the beginning of 2022 to 3.5% in December, its highest rate since October 2008.   

The government’s numbers department points out that the Office of Budgetary Responsibility, in its November report, expects Bank rate, to peak at 4.8% by the end of 2023.  

The department says: “Mortgage interest rates started to increase during 2022, this is likely to make borrowing more expensive for those with fixed rates deals coming to an end in 2023. Those with variable rate mortgages and private renters are also facing higher housing costs.”  

The body points out that should the interest rate on a £100,000 mortgage rise from 2% to 6%, assuming a 25-year capital and repayment mortgage, then the monthly mortgage repayment on the same mortgage would lift by £220 to £644.   

However, assuming the same increase on a £300,000 mortgage, monthly repayments would jump by £661 to £1,933.  

Around 4 in 10, or 45%, of adults with mortgages, reported being “very”, or “somewhat” worried about the changes in mortgage interest rates in the department’s Public Opinions and Social Trends survey in December.  

Private rental prices paid by tenants in the UK rose by 4% in the 12 months to November, up from 3.8% in the 12 months to October, according to data from the Index of Private Housing Rental Prices.  

Quilter mortgage expert Karen Noye says: “Those with a fixed rate mortgage coming to an end this year will likely have been shielded from the rise in interest rates so far as they had locked in at a time when interest rates were below 2%.   

“However, this now means they could be facing a significant increase in their monthly payments when they come to renew, and this could rapidly become unaffordable for many people – particularly if they still have a high loan to value.   

“And this is all in addition to eye-watering heating bills and food costs soaring, which will serve to make this winter in particular and the rest of this year difficult for millions.”  

“Given the high interest rates – many of which still sit around 6% – those looking to refix may well be more tempted to opt for a tracker mortgage rather than fix at the current levels, particularly after [Prime Minister] Rishi Sunak announced inflation is likely to half this year, which could mean that the Bank of England will not need to continue hiking interest rates.  

“Lenders are already tweaking their offerings to reflect this. For example, just last week Halifax relaunched a handful of tracker products aimed at first-time buyers and those looking to remortgage. Its two-year tracker rates for homebuyers range between 4.09% and 4.59%, compared with fixed rates of 5.12% to 5.82% for the same term.  

“While borrowers may feel a tracker rate is the better option, it is important that they are aware that tracker rates will likely be impacted by any further Bank of England rate rises and could therefore surpass the fixed rates currently on offer.”  

Carl Summers Financial Services financial adviser Scott Taylor-Barr adds: “There is no doubt that many people are concerned when we sit down and look at the costs of a new mortgage deal, compared to one they are about to roll off.   

“An increase of a few hundred pounds per month on an average mortgage is not uncommon. For many, this has led to a conversation about extending their repayment term to help manage that cost.   

“If they were prudent when rates were low and shortened their repayment term, this is quite simple, but for those that chose to take the low rates as cash in their pocket, it can be much harder.   

“For that latter group, it is often a case of talking through their expenses and looking at what could be cancelled or reduced or even considering if they need to revisit the age at which they ideally want to retire.”