Mortgage shock
Please may I have a comment for a piece in The Sun's money pages on the mortgage shock facing homeowners who fixed five years ago and now need to find a new deal?
Will it be a major hit for households?
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10 responses from the Newspage communityCopy all
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Yes, for a lot of households this will be a major hit, because people coming off five-year fixes are not just facing a small adjustment, they are walking from a completely different mortgage world into a much more expensive one. Many fixed when money was historically cheap, so even if they knew an increase was coming at some point, the reality can still feel brutal once the new monthly payment actually lands. What makes it worse is that this is happening in a market where rates have become jumpy again, so borrowers are not just dealing with higher costs, they are dealing with uncertainty too. My message is simple: do not drift, do not leave it late, and do not assume waiting will make it better. Review your options early, speak to your broker or lender in good time, and get a plan in place, because in this market hesitation can be a very expensive mistake.
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Those who took advantage of those extremely low rates in 2021 now need to make some decisions, hopefully with foresight to prepare for this. What may not be helpful has been the Middle East conflict, pushing rates up by around 0.75% in the last few weeks and with further rate increases on the horizon, so anyone with a mortgage deal expiring in the next 6 months needs to engage with their mortgage broker and quickly reserve a remortgage or product transfer.
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For people whose mortgage is coming to the end of a five year fixed rate this year, have been the ones benefiting from the last of the low rates seen following COVID. Back in 2021, we saw a lot of rates in and around 1% which is a far contrast to what we have today. With the removal of the last sub 4% rates and the continuing increases that we are seeing, people coming to the end of their current deal should act fast to secure a new deal. The impact of the current mortgage market compared to five years ago will have a significant impact to households, this could lead to a flood of new houses on the market simply due to people not being able to afford such an increase in their mortgage along with the increases in the cost of living.
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Yes, those who fixed 5 years ago will be seeing their current rates that start with a 1 or 2, now starting with a 4 in many cases.
We'd advise people to start looking at their options 6 months before their fixed rate ends, and looking at ways in which they can soften the blow of higher rates.
This could include extending the term of the overall mortgage, making a strategic overpayment or putting forward a higher valuation on the property to get into the next loan to value bracket, or moving to interest only.
Individual circumstances will dictate the best route to take, so speak with a whole of market mortgage broker for personalised advice.
We'd advise people to start looking at their options 6 months before their fixed rate ends, and looking at ways in which they can soften the blow of higher rates.
This could include extending the term of the overall mortgage, making a strategic overpayment or putting forward a higher valuation on the property to get into the next loan to value bracket, or moving to interest only.
Individual circumstances will dictate the best route to take, so speak with a whole of market mortgage broker for personalised advice.
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If your mortgage rate jumps from under 2% to over 4% overnight, your monthly budget takes a proper hit. That is the reality facing thousands of homeowners right now who locked in five years ago when money was cheap. Even if you half expected rates to rise, the size of the gap still stings when that first new payment leaves your account.
Do not sit on your hands and hope it gets better. Rates are volatile and waiting could cost you more. Speak to your broker early, review your options now, and have a plan before your current deal expires. In this market, hesitation is expensive.
Do not sit on your hands and hope it gets better. Rates are volatile and waiting could cost you more. Speak to your broker early, review your options now, and have a plan before your current deal expires. In this market, hesitation is expensive.
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Households coming off a five-year fixed rate this year are likely to face a significant increase in their payments. Earlier this year, things were looking more positive, with rates falling from last year’s highs. While many clients were expecting a rise in payments, it often wasn’t as severe as they had anticipated.
Recent rate rises have put households back under pressure. Planning ahead for the increase in payments can help ease the impact.
Speaking to your broker early can be advantageous, as we may be able to explore ways to keep payments to a minimum. Extending the mortgage term or considering different rate options are just some of the ways we can help minimise the impact of rising rates.
Recent rate rises have put households back under pressure. Planning ahead for the increase in payments can help ease the impact.
Speaking to your broker early can be advantageous, as we may be able to explore ways to keep payments to a minimum. Extending the mortgage term or considering different rate options are just some of the ways we can help minimise the impact of rising rates.
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There are approx 1.8M borrowers coming off fixed rates in 2026. These are a mixture of the those coming off rates in the 1%'s from the low rates and also those with 5 or 6% resulting from Covid and the Liz Truss Budget. With the geo-political climate, those borrowers who will see increases should look at their options 5-6mths prior to their product ending- good brokers will be in touch to review their options. They should have their documents ready and those that are self employed and whose products end the latter part of the year should get their tax affairs in shape asap into the new tax year. This way you can get prepared and secure a rate now and future proof for later as most good brokers would monitor your products and change to a lower rate if one post application comes available prior to your completion.
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Mortgage borrowers who have been sat on historical low rates will have been dreading this day for some time and whilst their payments were always going to increase, the sudden increase in rates as a result of the middle east war, will increase the pain. Typically speaking for every £100,000 of borrowing on repayment a 1% increase in rate will increase the monthly payment by £50-£60. For some the shock will be more significant than for others and they should be encouraged to face this head on to work out a solution.
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For many households, coming off a five year fix is a payment shock. People who fixed in 2021 are often refinancing into a much higher rate regime before budgets have caught up, so it can land like an overnight pay cut.
We came off our own five year fix last year and we did not plan early enough. The jump was bigger than we expected. In hindsight we should have started the switch sooner, but with rates moving around so quickly it was hard to feel confident picking the right moment.
Will it be a major hit? For a slice of borrowers, yes. The risk is not just the new rate, it is the trap doors: slipping on to an expensive SVR while you shop around, paying chunky arrangement fees that raise the true cost, or failing affordability checks and being pushed into a worse option.
Some pain is avoidable. Start the switch 3 to 6 months before the end date, compare total cost including fees, and ask about term extensions as a temporary pressure valve.
We came off our own five year fix last year and we did not plan early enough. The jump was bigger than we expected. In hindsight we should have started the switch sooner, but with rates moving around so quickly it was hard to feel confident picking the right moment.
Will it be a major hit? For a slice of borrowers, yes. The risk is not just the new rate, it is the trap doors: slipping on to an expensive SVR while you shop around, paying chunky arrangement fees that raise the true cost, or failing affordability checks and being pushed into a worse option.
Some pain is avoidable. Start the switch 3 to 6 months before the end date, compare total cost including fees, and ask about term extensions as a temporary pressure valve.
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Homeowners who fixed their mortgage rates 5 years ago enjoyed rates of 1% to 2%. The current mortgage market is turbulent, affected by Middle East conflict.
• Contact a Broker with access to whole of the market to look at options.
• Lenders offer a retention rate to keep you, normally within the last 4 to 6 months of your deal ending.
• Get a Decision in Principle from a broker, normally valid for 3 to 6 months, the rate can be locked in by submitting a full mortgage application with the lender. If rates come down, ask the broker to resource your deal or get the lenders new rate.
• Weigh up the total cost of remortgaging against staying with your lender. A remortgage may have legal, valuation, or product fees, and once you factor these in, the savings from a slightly lower rate elsewhere might disappear. In some cases, sticking with your existing lender can work out cheaper overall.
Be proactive, do not leave it too late to make decisions.
• Contact a Broker with access to whole of the market to look at options.
• Lenders offer a retention rate to keep you, normally within the last 4 to 6 months of your deal ending.
• Get a Decision in Principle from a broker, normally valid for 3 to 6 months, the rate can be locked in by submitting a full mortgage application with the lender. If rates come down, ask the broker to resource your deal or get the lenders new rate.
• Weigh up the total cost of remortgaging against staying with your lender. A remortgage may have legal, valuation, or product fees, and once you factor these in, the savings from a slightly lower rate elsewhere might disappear. In some cases, sticking with your existing lender can work out cheaper overall.
Be proactive, do not leave it too late to make decisions.