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Hundreds of thousands of homeowners are facing a mortgage timebomb before the year is out when their five-year fixed rate mortgage deals come to an end.
Many of these people are currently on fixed rate deals at around 2% or less, which they locked into in 2021 following the pandemic, but economic uncertainty caused by conflict in the Middle East has pushed up average five-year fixed rates to 5.54%, their highest level since August 2024.
That means someone with a typical 15-year £150,000 mortgage who took out a five-year fixed-rate deal at1.40% in 2021 could see their mortgage payments jump from £924 a month to £1,229 a month when their deal ends if they move onto a 5.54% fixed rate now – an increase of £3,660 a year or £305 a month.
Those with larger loans face an even bigger shock, with someone with a £500,000 home loan looking at an extra £1,015 added to their monthly mortgage costs if they move from a 1.40% fixed rate to a 5.54% rate, or £12,180 a year.
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “Many five-year deals struck in 2021 – when rates were at record lows – are now expiring, so household budgets must now adjust to accommodate significantly higher repayments.
“Anyone looking to buy now or remortgage in the next six months would be wise to secure the best deal they can find now. If the situation de-escalates and better rates emerge, borrowers typically have the option to switch to a cheaper product up until two weeks before their new mortgage term starts.”
Here, we explain what to do if your fixed rate mortgage is finishing soon, and how you can prepare for higher rates.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 2,600 reviews.
What higher rates mean for you
A good starting point is to work out exactly how big a jump in payments you’re likely to face when your current deal ends. There are plenty of mortgage calculators online, which can help you do this, such as this one from Tembo, or if you’re unsure, it’s worth seeking advice from a mortgage broker who can crunch the numbers on your behalf.
Once you have a rough idea of how much you’re looking at, this may help you decide whether you might be able to cover these extra costs with income or whether you might need to dip into your savings, or consider alternative options.
Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said: “With expectations for inflation to rise, and the potential for future base rate hikes, lenders are factoring this into their pricing – seeing the costs for borrowers go up.
“Since 9 March 2026, a staggering 1,700-plus mortgage products have been withdrawn, and as some of them are now returning at higher rates, it’s predicted many more lenders will follow in their footsteps to keep up with the current swap rate levels.
“Around 1.8 million borrowers are expected to refinance this year; this includes those coming off low five-year fixed rates. Borrowers have the option of securing a new deal typically up to six months before their current rate expires, this may be crucial for those who are concerned about rising costs.”
Learn more in our article Five good reasons to remortgage right now.
Bear in mind that variable mortgage rate costs have risen sharply too over the past couple of years, so you’ll also face much steeper costs if you’re planning to remortgage to a tracker or discounted rate. You can find out more in our guide Should I go for a fixed or variable rate mortgage?
What you can do to manage higher payments
Knowing your monthly mortgage payments are likely to jump sharply when your current deal ends can be really worrying. However, there are various steps you can take to help make the rise in costs more manageable.
For example, you may want to think about temporarily extending the term of your mortgage to make payments more affordable. Increasing the term from, for example, 10 to 15 years, will spread the amount remaining on your mortgage over a longer period, and reduce your monthly repayments. However, the downside of taking this option is that you’ll pay more interest over the repayment period, so ideally you should reduce your term again once you can afford to do so.
Alternatively, if you have a repayment mortgage, you might want to think about changing part of it to an interest-only basis temporarily to keep your payments down. Remember, however, that you’ll need a plan for how you’ll repay the original sum borrowed at the end of the term. Read our article How do I pay off my interest-only mortgage? to find out more.
You may alternatively want to consider taking out a retirement interest-only (RIO) mortgage, where you only pay the interest on the amount borrowed indefinitely, with the loan paid back only when the property is sold and you die or move out. You can learn more about retirement interest-only mortgages in our guide How retirement interest-only mortgages work.
Advertisement
Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 2,600 reviews.
If you are struggling with higher payments, please don’t suffer in silence and speak to your lender as soon as possible. They might be able to look at ways to make things more manageable for you. Read more in our article What can you do if you can’t pay your mortgage?
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