One Million More Homeowners to Face Higher Mortgage Bills This Year

Around one million more homeowners across the UK are set to see their mortgage payments rise this year, according to recent Bank of England figures. These households will join the millions who have already seen their monthly costs increase as fixed-rate deals taken out during the ultra-low interest rate period come to an end. The Bank's data paints a picture of a mortgage market still working through the aftermath of rapid rate rises that began in late 2021.

Why are so many homeowners affected?

The issue stems from timing. Between 2020 and early 2022, millions of homeowners locked into two- and five-year fixed-rate mortgages when interest rates were at historic lows—often below 2%, and sometimes below 1%. Since then, the Bank of England raised the base rate dramatically to tackle inflation, peaking at 5.25% in summer 2023. While rates have since eased slightly, they remain substantially higher than during the pandemic period. As those early pandemic-era fixes expire, homeowners are remortgaging onto deals that reflect today's higher interest rate environment.

The Bank of England's figures indicate that more than five million homeowners in total are now facing higher mortgage costs as they move off their previous deals. The additional one million households expected to remortgage this year represent those whose fixed terms are ending in 2026, most likely those who took out five-year fixes in 2021 or two-year deals more recently.

What kind of increases are people seeing?

The size of the increase varies enormously depending on what rate you're moving from and what you're moving to. Someone coming off a 1.5% fixed rate and remortgaging onto a 4.5% deal will see a significant jump in their monthly payment—potentially several hundred pounds on a typical mortgage. The impact is particularly acute for those with larger outstanding balances or those who borrowed at higher loan-to-value ratios. However, it's worth noting that current mortgage rates, while higher than the 2020-2022 period, are still below the peaks seen in late 2023, when some fixed rates briefly topped 6%.

Those remortgaging now have access to a more competitive market than they would have a year ago. Lenders have been gradually reducing rates as market conditions stabilise, and there's genuine competition for borrowers with decent equity in their homes. Still, for many households, the jump from a sub-2% deal to something in the 4-5% range represents a meaningful increase in monthly outgoings that requires careful budgeting.

The wider economic picture

This wave of remortgaging is a key concern for the Bank of England as it monitors the health of the UK economy. Higher mortgage payments mean less disposable income for affected households, which can dampen consumer spending—a major driver of economic growth. The Bank has to balance its desire to control inflation with the recognition that millions of households are already under financial pressure. This is one reason why expectations for further interest rate cuts have been building, though the Bank remains cautious about moving too quickly.

For the mortgage market itself, this ongoing wave of remortgaging keeps lenders busy and maintains competition for new business. Most borrowers coming to the end of fixed terms will shop around rather than simply accepting their existing lender's standard variable rate, which is typically much higher than available fixed deals. This creates opportunities for both borrowers and brokers to find better value in a crowded market.

What this means for you

If your fixed-rate mortgage is ending in the next three to six months, now is the time to start exploring your options. You can typically lock in a new rate up to six months before your current deal expires, which protects you if rates rise in the meantime. Don't assume your current lender is offering you the best deal—the whole-of-market rates available through a broker are often significantly more competitive. Even a difference of 0.25% in your interest rate can save you hundreds of pounds per year on a typical mortgage.

If you're facing a substantial increase in your monthly payment, speak to a mortgage adviser about your options. You might consider extending your mortgage term to reduce monthly costs, though this will mean paying more interest overall. If you've built up equity in your property, you may find yourself in a better loan-to-value band than when you last remortgaged, which can unlock cheaper rates. And if you're really struggling, talk to your lender early—they have a regulatory duty to support customers in financial difficulty and may be able to offer short-term solutions such as a temporary switch to interest-only payments.