Christmas could bring mortgage misery to 500,000 homeowners

Around half a million mortgage holders are facing an imminent financial shock as their fixed deals end in the Christmas period.

Figures from the Financial Conduct Authority (FCA) show that almost 500,000 fixed-rate mortgages will come to an end between November and January.

As a result of higher interest rates, the vast majority of those having to remortgage will see their monthly bills rocket.

Here, we unpack the looming mortgage crunch and offer advice to those needing to secure a new deal.

How many fixed-rate deals are ending?

Around a million homeowners have already had to swallow the tough pill of remortgaging onto a much higher rate in 2023. However, a winter bottleneck is looming, with 485,435 deals expiring over a three-month period.

January 2024 will be the busiest month for remortgagers, with 191,913 fixed term deals expiring.

In what is already the most expensive time of the year for many consumers, the mortgage crunch will leave a big dent in thousands of homeowners' finances.

What's happening to mortgage rates?

Data from financial analyst Moneyfacts shows that rate rises are much higher than in previous years.

Rates are highly dependent on the Bank of England base rate, which currently stands at 5.25%. Last month, it rose for the 14th successive time since December 2021, and it's expected to rise again tomorrow (21 September) to 5.5%.

While the average mortgage rates are above 6%, cheaper deals can be found. Data from Moneyfacts shows the market-leading two-year fixed-rate mortgage is currently 5.53%, from Coventry Building Society, while the top five-year term is Yorkshire Building Society's 4.99%.

Competition among lenders to offer chart-topping rates has been increasing over the past week, but significant movement is not expected over the coming weeks and months.

This graph shows how the average fixed rate for two-year and five-year deals has fluctuated over the past 24 months. It also shows how continual base rate hikes have impacted prices.

What difference do higher mortgage rates make?

The average mortgage holder has £147,000 left to pay off, according to the FCA.

In September 2021, someone taking out a two-year fix with 20 years left on a loan of that size would, on average, have paid £770 a month. But someone in that same scenario today would be paying £1,106 a month - a £336 difference, which equates to £4,032 extra annually.

• Find out more: mortgage repayment calculator 

What to do if you need to remortgage

In such a high-interest environment, it pays to be aware of the best steps to take when you need to refinance. 

• Find out when your current deal ends: if you have less than six months left on your fixed term, shop around for a new mortgage. Those with longer to go should also start thinking about the impact a higher rate will have on your finances in the future.
• Work out your current loan-to-value (LTV): your repayments and any increases in the value of your home could mean you can remortgage at a lower LTV, which tends to result in better rates (for example, 80% would be cheaper than 85%). You can find out your LTV by using our LTV calculator.
• Consider overpaying on your existing deal: before your current deal expires, overpaying can help you gain more equity in your home and potentially open up cheaper remortgaging rates. Overpaying before you go onto a higher rate will also help reduce your future interest bill. 
• Get a quote from your current lender: your existing lender will likely write to you and offer a new fixed rate six months before your current term expires. It is likely they will offer you exclusive rates in a bid to keep your custom. Our research last month showed which of the major lenders reward loyalty with cheaper mortgage rates.
• Research deals from other lenders and take independent advice: don't feel pressured to stay with your current lender. Use comparison sites to get an idea of the rates currently available and consider taking advice from a whole-of-market broker as they could have access to more deals.
• Don't fall onto your lender's standard variable rate (SVR): should you fail to remortgage onto a new deal, you'll be automatically put onto your existing provider's SVR. The average SVR is currently 8.09%, so your repayments will be more expensive. 
• Decide on a mortgage term (eg two year or five year): two-year terms are currently the most expensive, but they are the most popular as borrowers are gambling on interest rates falling before they need to remortgage again in 2025. There is, however, no guarantee that this will happen, so longer-term fixes are still appealing for those who don't want the hassle of refinancing again in the near future.  
• Keep an eye out for any additional fees: the mortgages with the lowest rates often come with a fee, so compare the overall cost before settling with our mortgage repayment calculator. A four-figure additional fee can easily negate the savings made by lower interest rates. 
• Lock in a rate: once you've found the best deal, you can secure the rate up to six months in advance. If a cheaper deal with your agreed lender then becomes available, you can switch up until the new rate kicks in.

You can find out more in our story on what to do if you need to remortgage.   

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Which? calls for strong mortgage support

The consumer champion is urging mortgage lenders to offer appropriate customer service support - via phone calls, email and chat support - during the Christmas holiday period. 

Those concerned about their ability to make mortgage repayments should contact their lender in the first instance. Doing so will not affect their credit score. 

Support could include a temporary mortgage holiday, temporarily paying only the interest on the mortgage (and not the capital repayment), or extending the term of your mortgage. 

The FCA’s new Consumer Duty, which holds firms in financial services to higher standards of customer service, should mean that customers are supported in a way that meets their financial needs. Companies that fail to do so should expect to face tough action from the regulator.

If you're worried about making your mortgage payments, see our guide on what to do if you can't pay your mortgage.

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