Deutsche Bank said homeowners who want to cash out their three-year-old deals want to double their monthly payments in the new agreement.
However, the German Investment Bank pointed out that home loans signed by 2022 and after 2023 will serve as cliff edge to consumers’ reactions to current market loan transactions.
The bank estimates that around £25 billion of homebuyers will receive refinancing deals by mid-2027, with UK financial forecasts reaching a new deal for 1.8 million customers this year.
The key deadline is the Liz Truss mini budget on September 15, 2022, which triggered a collapse in the UK financial markets, leading to higher mortgage rates, lower pound value, the danger of widespread failures across the pension industry and the rising costs of UK government borrowing.
Sanjay Raja, a senior economist at Deutsche Bank, said clients who get mortgage loans by 2023 and in longer duration mortgages “will increase their mortgage rates from below 2% to above 4%, roughly double the interest payments”.
But Raja added that “the increase in massive interest costs has arrived” because “two-year annual mortgage rates have transitioned to higher interest mortgage products”.
“Not all refinancing will see a significant increase in mortgage rates” because “the impact through higher interest costs will vary.” The economist noted in a note to clients on Friday.
“Indeed, families who withdraw mortgages after 2022 may have little change in their new mortgage rates at a time of re-restriction,” he added.
Raja said that while “mortgage refinancing costs will undoubtedly be painful” in the coming years, “a peak increase in total interest cost payments” may have passed.
But he added: “As this happens, some of the consumption may be resolved, but we expect a modest impact – especially if interest rates drop in the coming years.”
The two-year residence term reached 4.99% on August 13, the first decline since September 29, 2022 was below 5%, when it was 4.87%.
