Nearly four in 10 UK mortgages will roll onto higher rates over the next three years – even as Bank Rate is expected to fall
The Bank of England expects 43% of UK mortgage accounts – around 3.9 million loans – to refinance onto higher rates over the next three years. But while the Bank’s latest Financial Stability Report stresses system-wide resilience, brokers on the ground say the real story is far more uneven – and far more personal.
“The 43% figure feels directionally right,” says Louis Mason, Head of Marketing and Communications at Oportfolio. “But what the topline number doesn’t capture is the uneven concentration of that pain. It’s not just the volume of refixes that matters – it’s the vintage.”
According to Mason, the borrowers most exposed are those who locked into ultra-low 1–2% fixes in 2020–22. For them, the jump is not a modest £64, as the Bank suggests for a “typical” case, but something meaningfully harsher.
Payment shock: “It feels like taking on a whole new household bill
While the Bank estimates an average £64 monthly rise for owner-occupiers rolling off fixes, the real-world figures many intermediaries are seeing tell a more pointed story.
“For the typical Oportfolio client coming off a pandemic-era fix, we’re seeing monthly payments rise by £250–£600 depending on loan size,” Mason explains. “Higher-value borrowers in London and the Southeast are facing increases that feel more like an additional household bill than a minor tightening of the belt.”
Even financially stable households, he says, are surprised by how quickly the compound effects of higher rates, higher living costs and tighter affordability tests stack up.
“Most can afford the new payments, but they’re losing discretionary spending power at a pace that isn’t obvious in aggregated ‘resilience’ metrics.”
This divergence – between macro-level comfort and household-level strain – is becoming the defining theme of the refinancing cycle.
A calmer rate environment, but a tougher mortgage landscape
READ MORE: What a 3.5% Bank Rate floor would really mean for mortgages
Market pricing implies Bank Rate could settle around 3.5% in a year’s time, slightly lower than previously expected. Lender competition is already nudging quoted rates down, and around a third of mortgage accounts should actually see their payments fall over the next three years.
But for the millions heading the other way, decision-making is becoming more nuanced.
“A year ago, fixes were the default because clients were terrified of rate uncertainty,” says Mason. “Now, with rate cuts looking likely, more borrowers are considering shorter fixes or discounted trackers. But most still want fixes – not because they expect rates to rise, but because they want psychological certainty after two turbulent years.”
This shift in borrower behaviour underscores the importance of personalised advice in a market where averages obscure as much as they reveal.
Affordability changes: Helpful, but not transformationa
READ MORE: Fixed or variable: brokers weigh the trade-offs for borrowers
Recent adjustments to stress testing and LTI criteria have marginally broadened access. Mason describes the impact as meaningful but measured.
“The tweaks are helping at the margins. They’ve widened the options for clients who were right on the borderline, particularly strong-income borrowers with higher outgoings. Conversations with lenders have definitely become smoother – but it hasn’t transformed the landscape.”
For many households approaching remortgage, the big challenge remains not whether they can borrow, but whether the new payments will materially change their standard of living.
Will arrears rise? Brokers expect a “slow burn”, not a crisis
The Bank of England maintains that arrears remain low and households are resilient. Mason agrees – with a caveat.
“I suspect arrears will rise, but more as a slow-burn trend than a crisis. Most households will cope, but they’ll cope by cutting back elsewhere. The pressure is showing up in lifestyle adjustments long before it appears in arrears data.”
The borrowers he worries most about aren’t those with a single pressure point, but those navigating several at once – childcare costs, rental increases on second properties, or variable income.
“For them, the risk isn’t immediate default,” he warns. “It’s slipping into persistent financial strain that could push arrears upward through 2026.”
The disconnect brokers must manage
The Bank isn’t forecasting a mortgage meltdown. Household debt-to-income is at its lowest level since 2002; savings buffers remain elevated; banks are well-capitalised. But, as Mason emphasises, brokers don’t advise ‘the average household’ – they advise individual ones.
Over the next three years, the mortgage market won’t be defined by financial-system stability, but by the lived reality of clients facing higher payments just as headlines start talking about rate cuts.
And that, Mason says, is where brokers must step in:
“This cycle isn’t about panic. It’s about preparation. Early conversations, clear decisions, and realistic expectations will make the difference between clients absorbing the shock – or being overwhelmed by it.”
