Mortgage Rates Surge: 750,000 Households Face £2,040 Annual Payment Hike

As cheap fixed-rate deals expire, around 750,000 UK households face significant increases in their mortgage payments. According to Bank of England data, homeowners who locked into low rates before borrowing costs surged from 2022 onwards are now facing remortgaging at far higher rates.

The average two-year fixed rate has climbed to 5.63 per cent, while the typical five-year fix has reached 5.66 per cent. This is largely due to swap rate volatility driven by the ongoing Middle East conflict and fears of increased oil prices, which could reignite inflation.

Rachel Springall, finance expert at Moneyfacts, said lenders were forced to reverse recent cuts in fixed rates, undoing three consecutive months of reductions. She warned that homeowners approaching the end of their deals should start looking for options well in advance.

Those with smaller deposits are being hit hardest, with the average five-year fix for 95 per cent loan-to-value mortgages now above six per cent. Matt Coulson, founder of mortgage broker Heron Financial, cautioned against reading too much into short-term movements, stating that until borrowing costs genuinely come down and stay down, this is what to expect.

With the average standard variable rate sitting at 7.13 per cent, borrowers who lock in a deal early can switch to a cheaper one later if rates fall, provided they have not yet completed.