Almost half a million homeowners coming off five-year fixed rate mortgage deals taken out in 2020 could see a major spike in their monthly mortgage repayments.
These borrowers have been paying an average interest rate of just 2.11%. However, if they revert to their lender’s standard variable rate (currently averaging 7.13%) when their deal comes to an end, their monthly repayments could increase to £1,227 on average, a rise of £510 per month or approximately £6,000 per year.
Although rates have eased from recent peaks, they remain higher than the ultra-low levels seen during the pandemic. Borrowers who secured low-cost deals in 2020 are likely to face a payment shock. As a result, we advise shopping around, with our help, rather than automatically switching to your lender’s standard variable rate. Locking in a new five-year fixed rate at 4.33% could save over £3,600 a year, while a two-year fix at 4.6% could save around £3,290.
It’s important to review your options early. Many lenders allow borrowers to secure a new deal up to six months in advance, helping to avoid last-minute panic and potentially saving thousands in the process.
Your home may be repossessed if you do not keep up with repayments on your mortgage
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Nearly half a million homeowners could see ‘substantial increase’ in monthly mortgage payments
