Wave of remortgaging presents opening for advisers this winter
An estimated 350,000 UK households will soon require guidance from mortgage brokers as their five-year fixed rate deals, secured at the end of 2020, approach expiry. With these borrowers facing a sharp rise in repayments, industry professionals are being called upon to help clients navigate the transition to new, higher-rate products.
Analysis shows that these households, who locked in rates averaging 1.88% during a period of intense market activity driven by the pandemic and the government’s stamp duty holiday, will now encounter average remortgage rates of around 5%. For many, this will mean a substantial increase in monthly payments. A typical £200,000 mortgage could see repayments rise by £333 per month, or nearly £4,000 annually. In London and the South East, where property values are higher, annual increases may exceed £9,000 for some borrowers.
The surge in five-year fixed rate mortgages during late 2020 was fuelled by pent-up demand following the first national lockdown, as well as government incentives aimed at supporting the property market. Nearly half of all mortgage applicants during this period opted for five-year fixes, seeking stability amid economic uncertainty.
While mortgage rates have eased from the highs seen after the 2022 mini budget, borrowing costs remain well above levels seen before the cost of living crisis. The Bank of England’s base rate, now at 4%, had remained at or below 1% from early 2009 until July 2022.
“Hundreds of thousands of homeowners are in for an unpleasant shock this winter; the era of ultra-cheap mortgages is over,” said Greg Marsh, household finance expert and chief executive officer at Nous.co. “For these households, it’s leaving them thousands of pounds a year worse off. This adds an extra layer of stress to the process of remortgaging – which is already time-consuming and complicated. My advice to anyone in this position is to get professional advice from a reputable mortgage advisor to make sure they get the best deal and the right loan for their circumstances.”
Phillipa Jackson (pictured right), operations director at Purplebricks Mortgages, echoed Marsh’s advice, urging borrowers with upcoming renewals to act promptly and begin exploring their options before their current deals expire.
“Most lenders allow you to lock in a rate up to six months in advance,” Jackson said. “Speak to a mortgage broker who will have access to deals you may not see directly, and can help you navigate volatile rates. A good broker will also keep a close eye on the market after you’ve secured a deal – so if rates improve before your new mortgage completes, you won’t miss out.
“See what your existing lender is offering - some will offer reduced fees or better terms in a bid to keep you. Check your availability for other mortgage products they already have on offer. Budget ahead so you know exactly what your new payment will look like – and whether you can afford it.
“Review your household spending: could you save on energy, insurance, or subscriptions to free up cash? If you can, consider overpaying on your mortgage while the cheaper rate is still in place. Even small lump sums can reduce the balance and soften the blow.”
Jackson also advised borrowers to consider shorter-term fixes or tracker deals. “While these are less predictable, they may provide you with flexibility should rates continue to fall this year, and into next,” she said.
She added that impacted borrowers should check government and lender support schemes. “Some banks still offer temporary switches to interest-only, or extended terms in cases of hardship,” Jackson said. “The support lenders can offer will likely come in the form of restructuring – this means extending your term, switching you to an interest-only deal or pausing capital repayments. If you are worried about a rate increase, it’s wise to contact your lender now before any payments are missed.”
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