Approximately 1,095,905 homeowners are nearing the end of their two-year fixed-rate mortgages, with potential for substantial increases in monthly payments if they transition to their lender's standard variable rate (SVR). Data from Compare the Market indicates that these homeowners, who secured mortgages in 2024 at an average interest rate of 4.81 percent, could see their monthly repayments rise by an average of £283.
This increase is based on an average mortgage debt of £200,250. For homeowners who do not actively seek new deals, monthly payments could climb to £1,432 from a previous average of £1,149. Annually, this represents an additional £3,000 compared to their existing fixed-rate payments. The affected homeowners include first-time buyers, home movers, and those who have previously remortgaged.
Compare the Market noted that while mortgage rates have generally fallen since 2024 in line with the Bank of England's base rate, homeowners coming off fixed deals face higher costs. The average SVR currently stands at 7.13 percent, according to Moneyfacts, a significant jump from the average two-year fix rate of 4.79 percent recorded in July. Unlike fixed-rate mortgages, SVRs are lender-set and typically higher.
Experts advise homeowners to review their options before their current deal expires. Laura Pomfret of Compare the Market stated that an extra £283 per month could significantly impact household budgets. She emphasized the importance of planning for potential payment increases and adjusting budgets accordingly. Pomfret also recommended looking beyond the interest rate alone to consider the total cost of a new deal, including product fees and other charges, to ensure it fits household finances.
Separately, data from Zoopla highlights the broader impact of higher mortgage rates on prospective buyers. Buyers now need to allocate an average of £18,200 more for a deposit to maintain the same monthly repayments they would have expected at the start of the year. This is because a buyer who could previously afford a £200,000 mortgage would now only be able to borrow around £182,000 for the same monthly payment due to rate increases. In London, the additional deposit required is nearly double the national average, at £35,500, while in the North East, it is approximately £10,200 due to lower house prices.