More than 350,000 UK households set for huge mortgage hikes this winter

Mortgage payments will skyrocket this winter for thousands of households as their five-year fixed-rate deals come to an end. According to analysis by the bill management app Nous and first reported by The Guardian, 350,000 five-year fixed-rate mortgage deals will end this winter. Based on average mortgage rates, these borrowers could see an increase from under 2% to around 5% charged on what they owe, the equivalent of almost £4,000 more per year on a £200,000 mortgage.

While the affected households have been able to dodge the peak mortgage rates of two years ago, the sharp rise will still shock even the most sturdy monthly budgets.

Greg Marsh, the chief executive of Nous, said: "Hundreds of thousands of homeowners are in for an unpleasant shock this winter. The era of ultra-cheap mortgages is over. For these households, it’s leaving them thousands of pounds a year worse off."

Why are some mortgage payments going up?

Many people will be desperate to forget that first pandemic year, but cast your mind back half a decade to 2020 and you might remember almost everything being much cheaper, including your mortgage payments. Back then, the Bank of England (BOE) base rate was at just 0.1% and mortgage rates were at record lows. Anyone signing up to a five-year fixed-rate deal would have been able to ignore the soaring mortgage rates of recent times, albeit in the midst of a wider cost-of-living crisis, knowing that what they paid each month was fixed.

Fast-forward to today and many of these borrowers are looking at a changed mortgage market as their deals approach expiration. Ultra-low rates of less that 2% are long gone and even the best mortgage rates in UK are barely under 4%. Many people will have already experienced the pain of remortgaging from a low rate to a much higher one, but coupled with higher energy prices, water bills and council tax, now is a particularly tough time to see your mortgage payments soar.

Will mortgage rates go down this year?

One silver lining for borrowers approaching the end of their fixed terms could be further reductions in mortgage rates. While it is far from certain, there are forecasts that the Bank of England will cut the base rate one more time in 2025. This would mean that the base rate falls to around 3.8% by the start of 2026. However, there are predictions that it could rise back towards 4% by 2030. This is a sharp contrast to market predictions just a few months ago that the base rate would fall all the way to 3.14% by 2029. Now, the rate is expected to stay much higher for longer, leading to the recent increase in mortgage rates.

Why do mortgage rates go up?

The rate lenders charge on mortgages are tied to the Bank of England base rate. The BOE raises the base rate in an attempt to reduce UK inflation down to its 2% target. After 14 hikes between December 2021 and August 2023, inflation fell as low as 1.7% from a high of 11.1%. However, CPI (consumer price inflation) has since hit 3.8%, almost double the target rate. The BOE expects inflation to increase to 4% soon and it has made clear that interest rates will go up again if inflation starts to accelerate further.

We go into more detail in our article 'Will interest rates continue to fall in 2025 & how low will they go?'.

What can you do to get the best mortgage rate?

Mortgage rates change regularly, so the easiest way to check for the best deals is by using our mortgage rate comparison tool.

Our tool will help you find the best mortgage interest rates available for the amount you need to borrow, based on your LTV (loan-to-value ratio). Other factors, including your income, outgoings, credit score and borrowing history, will affect whether or not you actually qualify for those top deals.

We provide specific guidance around finding the best mortgage deals in our articles 'How to get the best mortgage deal' and 'How to remortgage and get the best rate'.

To find the very best mortgage rate for your needs, you could speak with a mortgage broker – ideally one who has access to the whole mortgage market. Mortgage brokers have expertise in how to get the best mortgage rate for specific circumstances and can access deals that may not be offered to consumers directly.

You can source a vetted mortgage professional locally using VouchedFor* – make sure to read our article 'How to find a mortgage broker you can trust' first – or you can get in touch with the online mortgage broker, Habito*, which has a mortgage search tool, an online chat service and access to over 90 lenders.

 

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