£840 a year more: one million homeowners hit by remortgage rise

Around one million homeowners have come off cheaper fixed rate deals since February, and the new deals waiting for them are costing up to £840 more a year. The figures come from the Bank of England, with analysis by the Financial Times putting the typical increase at between £50 and £70 a month. For households already juggling energy, water and council tax, that is another fixed cost landing every four weeks.

The people affected are not borrowers who did anything wrong. They are homeowners whose cheap fix simply ran out, in many cases a deal signed when rates were far lower than they are now. The jump is automatic and it arrives whether or not wages have moved.

The £840 figure is what a typical borrower faces over a year. It is not a ceiling. According to the analysis, the increases can be considerably larger for people with bigger mortgages, so anyone carrying a larger balance should expect the monthly gap to be wider than the headline number suggests.

The reason sits away from the kitchen table. The cost of government borrowing has risen, and that feeds through into the price lenders charge for home loans. Households end up paying for pressure in the bond market that they had no part in creating and no way of avoiding.

Lenders have moved quickly. Some 59 of them have increased their mortgage rates since the beginning of September, according to Moneyfacts. That is a broad repricing across the market rather than one or two outliers, which leaves little room for borrowers to shop their way out of the increase.

The rates themselves show the scale of the shift. The average two year fixed rate has climbed from 5.59% on 1 September to around 5.9%. Five year fixes have followed, approaching 6% against 5.63% at the start of the month, according to the same Moneyfacts figures.

The timing is awkward for Prime Minister Andy Burnham, whose Budget is set for 28 October. He is under pressure to raise money while keeping the confidence of financial markets, and those higher borrowing costs are now showing up directly in household finances. What he does on 28 October will be read closely by the same markets that are setting the price of these mortgages.

For ordinary households the politics matter less than the direct debit. An extra £50 to £70 a month is a weekly shop, a car service or the gap between covering the bills and dipping into savings. Anyone whose fix ends in the coming months would do well to look at the numbers early rather than being moved onto a lender's standard rate by default, because that is where the cost tends to bite hardest.