UK mortgage hit for nearly 1 million households

Almost a million homeowners are facing higher mortgage costs

Nearly a million homeowners are preparing for another financial blow, with monthly mortgage payments rising by almost £100 as lending rates increase.

Those coming off five-year fixed deals and securing new rates are now paying an average of £94 extra per month, according to data from Connells Group. The rise reflects a dramatic change in mortgage pricing, with average rates on new five-year fixes standing at 4.72%, compared with just 2.5% on the deals many borrowers locked into in 2021 before interest rates soared.

Approximately 971,000 five-year fixed mortgages are set to expire this year, according to the Financial Conduct Authority, while UK Finance estimates roughly 1.8 million fixed-rate deals will reach their end.

The recent increases arrive amid global economic uncertainty linked to the conflict involving Iran, which has rattled markets and prompted lenders to adjust mortgage pricing swiftly.

Thousands of products have been withdrawn or repriced since strikes commenced on February 28 amid concerns over disruption to oil and gas supplies through the Strait of Hormuz, stoking inflation fears.

Prospects of cheaper borrowing have also been dampened. The Bank of England, which had reduced its base rate six times since August 2024, maintained rates at 3.75% on March 19 rather than proceeding with another cut. For numerous borrowers, the change has been sudden. Those who arranged new deals between late January and late February experienced smaller rises of between £22 and £66 monthly on average, the Connells data reveals.

Mark Harris of SPF Private Clients told the Times: “The past few weeks have been extremely difficult for those coming off fixed rates who may well have anticipated that they would be in a better position than they now find themselves.”

Even borrowers on shorter fixes are experiencing the pressure. Homeowners ending two-year deals taken out in 2024 are now seeing only modest reductions. Those securing a new deal since Sunday will save an average of £32 monthly, with rates dropping only marginally from 4.91% to 4.85%.

That is vastly different from expectations earlier this year. Before the latest market turbulence, borrowers refinancing two-year fixes were set to reduce payments by approximately £100 monthly. Deals agreed in the final week of February, for instance, averaged 4.12% compared with 5.01% previously – delivering savings of £133 monthly.

Karen Noye of Quilter said: “Mortgage rates have moved back in the wrong direction for those remortgaging, and the overriding emotion is now disappointment. Clients who fixed more recently, often at higher rates, had been pinning their hopes on a meaningful drop when they came to refinance.

“Instead, many are now coming to terms with the reality that the change in their monthly payments is minimal, or in some cases non-existent.”

Those nearing the end of a fixed-rate deal can usually lock in a new rate up to six months ahead, while keeping the flexibility to switch should a more attractive offer come along. Financial experts also recommend exploring product transfer deals with current lenders, which can provide competitive rates without the need for further affordability assessments.