Mortgage warning as millions ‘will be shocked’ as annual payments could rise by £2,124 this year

Homeowners who locked in ultra-low mortgage rates five years ago are now facing higher costs as those deals begin to expire in 2026.

Around 971,105 five-year fixed-rate regulated mortgages were taken out in 2021, new data shows. Many of these borrowers secured rates below two per cent during a period of historically low interest rates.

With current rates sitting considerably higher, hundreds of thousands of households face the prospect of substantially increased monthly outgoings when they come to remortgage this year.

Sajni Shah, a mortgage expert at Compare the Market, said many households “will be shocked” to see their repayments jump, adding that when homeowners are checking out their remortgage options “even small differences in rates can add up to thousands over the life of a term, so shopping around, comparing lenders and locking in a competitive rate could make a huge difference in keeping rises to a minimum”.

In 2021, five-year fixed mortgage rates below two per cent were widely available during a period of exceptionally low interest rates. Borrowers coming to the end of those deals now face much higher costs when remortgaging.

Data from L&C Mortgages shows that the average of the lowest five-year fixed remortgage rates across the ten largest lenders stood at 3.89 per cent in January 2026.

Compare the Market estimates that this jump in rates could add as much as £2,124 a year to some households’ mortgage bills, based on average house prices in 2021 and a 25 per cent deposit.

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The figures relate to regulated mortgages and do not include any loans that may have been paid off early before reaching their renewal date, according to data obtained from the Financial Conduct Authority by Compare the Market.

Homeowners who allow their mortgage to roll onto a standard variable rate once their fixed deal ends could face even sharper increases in monthly repayments.

While mortgage rates have eased slightly in recent months, pressure remains. The Bank of England cut the base rate by 0.25 percentage points to 3.75 per cent in December, but borrowers are still advised to factor in arrangement fees as well as headline rates when assessing the true cost of a new deal.

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David Hollingworth, associate director at L&C Mortgages, said: “Homeowners that locked in a super-low rate five years ago have been sheltered from the ups and downs in interest rates in recent years.

“Although a hike in payments is inevitable once the fix ends, the good news is that mortgage rates have improved substantially recently and are much lower than at the peak.

“That will help to limit the increase, but it makes shopping around for the best deal even more vital. Starting the process several months in advance will help borrowers prepare for higher rates and enable a smooth transition to a new deal.”

Beginning the remortgage process several months ahead allows borrowers time to prepare and secure a smooth transition to a new arrangement.

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The broader picture shows even more households facing similar pressures. A UK Finance spokesperson said: “Around 1.8 million households are due to come off fixed rate deals this year, and we expect around half of these to be five-year fixes.”

The trade body emphasised that the mortgage market remains competitive with numerous options available, urging borrowers to compare deals or consult a broker about their individual circumstances.

For those anxious about meeting higher payments, the spokesperson offered reassurance: “If anyone is worried about their mortgage payment your lender is here to help. The earlier you contact your lender, the more options they will have available and the sooner they will be able to help you.”

The FCA data covers regulated mortgages only, typically owner-occupier products, excluding buy-to-let and commercial lending.