Hundreds of thousands face payment shock as low-rate terms end
Mortgage brokers are expected to play a vital role in supporting more than 350,000 households whose five-year fixed rate mortgages are set to expire this winter.
As these borrowers reach the end of deals secured between October 2020 and February 2023—when interest rates were at historic lows—many will face a significant increase in monthly repayments, according to analysis by bill management platform Nous.
Nearly half of all mortgages arranged during that period were fixed for five years, allowing borrowers to avoid the rate spikes seen two years ago. However, with average five-year fixed rates now at around 5%, compared to 1.88% in 2020, those seeking new deals could see their payments rise sharply.
For a typical £200,000 mortgage, monthly repayments could increase by £333 to £1,169, amounting to an extra £3,996 each year. Larger loans, such as £500,000, would see even greater increases.
Lenders have recently raised interest rates after a period of reductions. Last week, major providers including Nationwide Building Society and Halifax increased the rates on some of their fixed-term products, with HSBC following suit on Monday. Although these adjustments have generally been modest—Nationwide, for example, added 0.20 percentage points to certain fixed rates—they are likely to be unwelcome for those currently seeking new mortgage deals.
Recent economic data has cast doubt on the likelihood of further Bank of England base rate cuts in the near term. Catherine Mann, a member of the Monetary Policy Committee, recently stated that the present environment calls for the central bank’s base rate—a key factor influencing UK mortgage rates—to remain steady for a “persistent” period, citing concerns about inflation.
“Hundreds of thousands of homeowners are in for an unpleasant shock this winter,” said Greg Marsh, chief executive of Nous, in an article published by The Guardian. “The era of ultra-cheap mortgages is over.
“For these households, it’s leaving them thousands of pounds a year worse off. The increases come as other household bills are also rising, with water and council tax up this year and energy prices set to rise in October.”
As remortgaging borrowers face these challenges, the role of mortgage advisers has become increasingly important.
Mark Harris, chief executive of mortgage broker SPF Private Clients, emphasised the need for professional guidance across the market. “All cohorts of borrowers—whether first-time buyers (with the new schemes available), those remortgaging (coming off a two- or five-year fix), or purchasing their next home—should seek advice,” he said.
“Clients’ situations are increasingly complex, and borrowers cannot afford to get it wrong. Obtaining advice provides borrowers with a level of protection against that.”
Nicholas Mendes, mortgage technical manager at mortgage broker John Charcol, meanwhile, advised borrowers reaching the end of their fixed-rate deals to plan ahead.
“If your mortgage deal is ending soon, start reviewing options four to six months before expiry,” he said. “Many lenders will let you secure a rate early and then switch to a lower one before completion if the market improves. That way, you’re protected if rates rise but can still take advantage if they fall.
“For buyers, preparation is key—the best deals can vanish overnight. Even in a calmer market, speed and organisation often make the difference between securing a top rate and missing out.”
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