Almost 70,000 owners face abrupt rise in mortgage funds this month

Almost 70,000 households are set to see their mortgage repayments soar by thousands of pounds in 2026 as their cheap fixed-rate deals abruptly end.

Borrowers who secured low five-year home loan deals in the depths of the Covid-19 pandemic must now roll on to far higher rates that could send their household finances into a spin.

That’s according to money-saving tool Nous which has crunched the numbers. 

It said 69,000 households snapped up a cheap five-year fixed-rate deal in January 2021, when typical rates were below 2 per cent.

But these savvy homeowners who made the most of the 0.1 pc base rate are now in for a rude awakening.

These families face average rates of 4.9 per cent when they remortgage, Nous says.

It is important that they do remortgage, though, as doing nothing will see them landed on their lender’s standard variable rate – which can be more than 7 per cent.  

For a homeowner with a typical £200,000 mortgage, their repayments would climb from £836 a month on a 1.88 per cent interest rate to £1,157 on this new 4.9 per cent a month – a £321 surge.

Across 2026, these beleaguered borrowers will need to stump up an extra £3,852, no mean feat for families facing persistently higher costs amid sticky inflation. 

However, borrowers with a higher proportion of equity in their property and a good credit score can get deals as low as 3.7 per cent. 

Getting the cheapest deal may require you to shop around and switch from your existing lender. 

A mortgage broker can help with this, and they are often free of charge for the customer. 

If you’re looking for a new mortgage, you can enter your home’s value and mortgage size and see the latest rates using This is Money’s mortgage finder. 

Someone who had 40 per cent equity in their home and was taking out a £200,000 mortgage on this 3.7 per cent rate would pay back £1,022 a month, based on a 25-year term. 

While this is a smaller payment, it is still likely to sting household finances for families who had been enjoying ultra-low costs.

Greg Marsh, chief executive of Nous, said: ‘Tens of thousands of homeowners coming to the end of cheap five-year deals are in for an unpleasant start to 2026.

‘These households are only just being hit by higher interest rates, and face paying thousands of pounds more each year just to stay in their homes.

‘Remortgaging is already complicated, stressful and time-consuming, and rising rates only add to the stress.

‘My advice is to seek professional guidance early to make sure you’re getting the right deal for your circumstances.

‘Most of us struggle to stay on top of the admin associated with getting fair deals, and end up seriously overpaying on our essential bills as a result.’

How did we get here? 

Mortgage rates began to dramatically climb at the tail end of 2022 as former Prime Minister Liz Truss’s mini-Budget wreaked havoc on the bond markets, which pushed up borrowing costs.

They then spiked further in 2023, as the Bank of England repeatedly hiked the base rate due to concerns about stubbornly high inflation.  

Average two-year fixed-rate deals reached a peak of 6.86 per cent in July 2023, according to rate scrutineer MoneyfactsCompare. 

Meanwhile, the average five-year reached a peak of 6.51 per cent peak in October, 2022.

Costs have been trickling down over the past year – not least in December when a rate war waged among lenders ahead of the cut to the Bank of England base rate – although they are still far above the lows seen during the pandemic.

Adam French, of MoneyfactsCompare, says if the Bank of England base rate falls to around 3 per cent to 3.5 per cent this year, homeowners can expect to see average mortgage settle at 4 per cent to 4.5 per cent.

‘It’s lower than today, but still substantially higher than the ultra-cheap borrowing many households became accustomed to in the 2010s.

‘Mortgage borrowers may see more tangible savings, but expectations should remain measured. 

‘Over the past few years, average mortgage rates have typically sat around 0.8 percentage points above the base rate.’