'Payment shock' to be cushioned for people coming off fixes

Borrowers whose fixed-rate mortgage deals come to an end this year face a much smaller "payment shock" than was previously expected, the Council of Mortgage Lenders (CML) has said.

Around 1.4 million fixes, ranging from two to five years in duration, are expiring in 2008. It had been thought that many of the people on these deals were in line for substantial increases in their monthly mortgage repayments – as much as £100 to £200 in some cases. This would have happened either as they were shifted on to their bank's standard variable rate or as they opted to move to another lender, but at a higher rate than their previous loan.

However, with two reductions in the Bank of England base rate since December, and with further falls likely, the pressure is now easing, according to the CML.

"We estimate that the monthly rise for a borrower [with an average £114,000 repayment mortgage] coming out of a two-year fix and choosing a new base-rate tracker mortgage will have declined from £140 in the first quarter to £39 in the fourth," said a CML spokesman.

However, people coming to the end of five-year fixes could still see their repayments rise quite sharply, as rates were much lower when the deal was taken out than they are now.