Around 750,000 UK households are set to see their mortgage payments rise by an average of £170 a month this year as sub-three per cent fixed-rate deals expire, according to data from the Bank of England and mortgage experts.
That amounts to roughly £2,040 extra per year for families currently paying less than three per cent interest. The increase comes as lenders have pulled back on recent rate cuts, with some five-year fixes at 95 per cent loan-to-value now back above six per cent.
Lenders reverse rate cuts
Rachel Springall, finance expert at Moneyfacts, said: "Lenders were somewhat forced to U-turn on fixed rate cuts in July, knocking back the short-lived progress of three consecutive months of reductions to the average two- and five-year fixed rates."
She added: "The prolonged conflict has driven up oil and energy prices, raising inflationary fears which could in turn lead to future Base Rate increases by the Bank of England."
The Bank Rate currently stands at 3.75 per cent after being held at its July meeting.
Impact on borrowers
Matt Coulson, founder of mortgage broker Heron Financial, said: "Deals are lasting barely a fortnight, and it's the borrowers with the least room who feel it most, with some five-year fixes at 95 per cent loan-to-value now back above six per cent."
Ms Springall advised those buying homes and remortgaging to seek support from a mortgage broker. "The limited timeframe makes it ever more essential to seek advice early, particularly those who are due to remortgage this year," she explained.
"Borrowers could choose to refinance with their existing lender for ease, but it's always wise to shop around first to get a sense of the new rates on offer, particularly if coming off a low-rate deal."
Advice for affected households
According to the Bank of England, 750,000 households with a fixed rate set to expire in 2026 are currently paying rates below 3% and are expected to face an average repayment increase of around £170 per month. Waiting too long to secure a new deal could be an expensive mistake, as the average revert rate is above 7%.
