THE boss of major bank Barclays has warned of a "huge income shock" for millions of mortgage holders.

CS Venkatakrishnan spoke at Wall Street Journal's CEO Council Summit about how rising interest rates will affect people's income.

Typical UK mortgages are two-year fixed rates, meaning most people will begin to feel the impact of these higher rates when their current deal finishes before the end of 2024.

CS Venkatakrishnan also said increased interest rates will see renters' payments go up by the end of next year.

He said: "By our assumptions, for the median family income with the median mortgage, what they have paid as their mortgage or rental payments in the last two decades – the ’90s to 2020 – was about 20% of their income.

"That is going to be about 28% to 30% of their income. So there is a huge income shock."

Read more in Mortgages

Six things homeowners MUST do as over a million fixed-rate mortgages end

CS Venkatakrishnan added the increase in repayments will impact households' abilities to buy everyday essentials such as food and energy.

It comes after mortgage rates spiked following successive BoE base rate rises.

The most recent rise saw the rate go from 4.25% to 4.5%.

The central bank has been taking action to stem surging inflation, which topped 11.1% in October last year.

Most read in Money

But while increased base rates are good news for those with plenty of cash stashed away in savings accounts, it's bad news for mortgage holders.

That's because BoE base rate rises have a knock-on effect on mortgage rates.

It means households with a £250,000 mortgage have already been paying £612 more a month compared to November 2021, when rates were 0.1%, according to TotallyMoney.

What can I do if my fixed rate is coming to an end?

If you are one of the millions of homeowners coming to the end of a fixed-rate deal soon and you're worried about increased payments, there are some steps you can take.

You can use a mortgage broker to help you get the best deal on the market when your current one ends.

Mortgage brokers help arrange loans between you and the lender.

Next, you could overpay on your mortgage.

Most lenders let customers on fixed rates make overpayments of up to 10% of the outstanding mortgage balance in a year.

But bear in mind it's important to not pay more than 10% because this can trigger hefty early repayment charges.

Many homeowners are currently on fixed rates lower than the rates on the market today.

Therefore, when it becomes time to remortgage, you’re likely going to be moving onto a higher rate regardless of the loan-to-value of your property, mortgage broker Nicholas Mendes previously told The Sun.

"Utilising your allowance while on a low rate can be a more cost-effective way of significantly reducing your mortgage balance than making overpayments when the percentage is higher, because the rate reflects the cost of borrowing per pound," he said.

Lastly, if you've recently had work done on your property, it's worth finding out its latest EPC rating.

Read More on The Sun

Little-known TV licence rule could save you up to £159 a year

Woman left unable to talk properly after her new dentures arrive totally uneven

This is the rating that's issued to a home, and lasts 10 years, which tells prospective buyers the energy efficiency of your home.

If it's improved, it could help you access better rates on a re-mortgage as lenders are keen to lend to homes that have an EPC rating of C or above.

Do you have a money problem that needs sorting? Get in touch by emailing [email protected]

Source: Read Full Article