Research from Compare the Market found that the average interest rate for this cohort of borrowers is 2.11%, and a move onto current lenders’ standard variable rates (SVRs) could see their monthly mortgage payments jump to £1,227.
This is equal to a £510 increase, assuming an average mortgage debt of £178,523, and is equal to paying around £15,319 per year compared to the £9,195 that homeowners are estimated to be paying currently.
Compare the Market said homeowners could save money if they shop around for a deal rather than reverting to the lender’s SVR.
A new five-year fixed rate is 4.33%, which could lead to £3,618 in savings per year when compared to an average SVR of 7.13%.
Switching from the average SVR to a two-year fixed rate, estimated at 4.6%, could save around £3,290 annually on mortgage repayments.
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The report noted that while mortgage pricing had fallen, homeowners coming off 2020 deals would still face higher pricing.
Compare the Market said homeowners moving to a five-year fix with an average interest rate could see monthly repayments increase by £209, and on a new two-year fixed rate, payments could increase by £236 per month.
Guy Anker, mortgage expert at Compare the Market, said: “Our research shows that around half a million homeowners locked in a five-year fix rate in 2020 when rates were low during the pandemic. Securing these deals may have saved households a significant amount of money over the past five years. However, as they reach the end of their fixed rate, these households may now face a substantial jump in mortgage costs.
“For any homeowners coming off a fixed rate mortgage this calendar year, it’s worth shopping around online soon and seeing what other deals are available, as this could potentially save thousands in annual repayments compared to going onto an SVR. You can sometimes book in a new rate up to six months before it’s due to start, and even if your deal expires towards the end of the year, it’s worth understanding the market now so you’ve all the info to hand when it’s time to act.
“While you can compare online, it’s also a good idea for homeowners to speak to a professional mortgage adviser to be as informed and confident as possible in their financial decisions if they don’t understand what can be a complex market. Even as someone who knows the market, I would use a broker, as they can have access to deals or crucial lending criteria not available to the general public.”
David Hollingworth, associate director at L&C Mortgages, said: “Although many homeowners have had to deal with the payment shock of their ultra-low fixed deal ending, fixed rates have improved recently as the rate outlook has improved. While this will ease some of the pain, hundreds of thousands will still be steeling themselves for a steep hike in their rate as their fix ends.
“There could be temptation to wait in the hope of lower rates to come, but that carries the risk of falling onto a sky-high standard variable rate. With uncertainty in the market, rates are constantly moving and some have edged back up, so it can be a confusing time for borrowers. Seeking advice in good time will allow homeowners to secure a deal, protecting against any turnaround in pricing but still having the chance to review before the switch and take advantage of lower rates, if there is further improvement.”
