If you locked into a fixed rate mortgage deal five years ago, it’s worth checking when your deal ends so that you aren’t hit with a big payment shock when you come to remortgage.
Trade body UK Finance expects remortgaging to increase by 10% to £77 billion in 2026, with 1.8 million fixed mortgage rate deals due to finish this year. Those coming off five-year fixed rate deals are likely to see the biggest jump in payments, as mortgage rates were exceptionally low in 2021 following the pandemic.
L&C’s remortgage tracker, which looks at mortgage rates from the top 10 lenders, shows that in March 2021, the average five-year fixed mortgage rate for a homeowner borrowing up to 60% of their property value stood at just 1.35%.
By contrast, the average five-year fixed mortgage at the start of this month was 3.89%, or 3.77% for a two-year fixed rate.
Although these are both more than double average five-year fixed rates in 2021, borrowers may take some comfort from the fact that rates are easing. In March 2024, average five-year fixed rates stood at 4.41%, so over a percentage point higher than the current average.
What you can do to manage higher mortgage rates
If your fixed rate mortgage deal is coming to an end this year, it’s well worth seeking advice early so you can get a feel for how much your monthly mortgage payments might increase by.
Most lenders will allow you to secure your next mortgage deal from three to six months in advance, so if you spot a competitive deal now, you can secure it before your current deal ends. If you’re worried that rates might come down further over the next few months, L&C’s Rate Check service means that we can review your mortgage before it completes and help you move to a better deal if one becomes available.
It's also worth looking at ways you might be able to lower the cost of your monthly payments when you come to remortgage. For example, if you’re currently locked into a very low rate, and you can afford to do so, you may want to make overpayments to reduce your mortgage balance. Lenders will typically allow borrowers to repay up to 10% of their mortgage balance each year penalty-free, but always read your mortgage small print carefully first.
