Almost one million homeowners across the United Kingdom are bracing for a substantial financial shock in 2026 as their five-year fixed-rate mortgage deals reach their conclusion. According to exclusive data obtained through a freedom of information request, a staggering 971,105 such mortgages were initiated in 2021, setting the stage for widespread payment increases as these agreements mature.
The Looming Payment Increase
Homeowners who secured their mortgages during the historically low interest rate period of 2021, when sub-2% five-year rates were commonplace, now face a dramatically different financial landscape. While mortgage rates have retreated from their peak levels, they remain significantly higher than those available five years ago, creating what experts describe as an inevitable payment shock for affected households.
Current Market Conditions
Recent data from L&C Mortgages reveals that the average of the lowest remortgage five-year fixed rates across the ten largest mortgage lenders stood at 3.89% in January 2026. This represents a substantial increase from the ultra-low rates that were widely available in 2021, though it does mark an improvement from the higher rates seen during the intervening period.
The Bank of England's decision to cut the base rate by 0.25 percentage points to 3.75% in December provided some relief, but experts warn that many homeowners will still experience significant payment increases when their current deals expire.
Potential Financial Impact
Calculations by Compare the Market indicate that the transition to higher rates could potentially increase some households' annual mortgage payments by as much as £2,124. This projection is based on average house prices from 2021 and assumes the homeowner initially provided a 25% deposit.
The situation becomes particularly acute for borrowers who allow their mortgages to automatically roll onto standard variable rates (SVR) when their fixed terms conclude. These variable rates typically result in even more substantial cost increases compared to securing a new fixed-rate deal.
Expert Recommendations
Sajni Shah, a mortgage expert at Compare the Market, emphasised the importance of proactive planning: "Many households will be shocked to see their repayments jump. When homeowners are checking out their remortgage options, even small differences in rates can add up to thousands over the life of a term. Shopping around, comparing lenders and locking in a competitive rate could make a huge difference in keeping rises to a minimum."
David Hollingworth, associate director at L&C Mortgages, offered both caution and reassurance: "Homeowners that locked in a super-low rate five years ago have been sheltered from the ups and downs in interest rates in recent years. Although a hike in payments is inevitable once the fix ends, the good news is that mortgage rates have improved substantially recently and are much lower than at the peak. That will help to limit the increase, but it makes shopping around for the best deal even more vital."
Broader Market Context
The Financial Conduct Authority's data, which forms the basis of these projections, covers regulated mortgages only, typically comprising owner-occupier arrangements. Buy-to-let and commercial mortgages, being unregulated products, are not included in these figures, meaning the actual number of affected households could be higher.
A spokesperson for UK Finance provided additional context: "Around 1.8 million households are due to come off fixed rate deals this year, and we expect around half of these to be five-year fixes. The mortgage market is competitive with a wide range of options available, and we encourage people to shop around or speak to a broker about what is best for their circumstances."
Practical Advice for Homeowners
Mortgage experts unanimously recommend several key strategies for homeowners facing renewal:
- Begin the process early: Starting remortgage preparations several months in advance allows for thorough research and a smoother transition
- Consider all costs: When comparing deals, factor in the overall mortgage cost including arrangement fees, not just the interest rate
- Explore professional guidance: Mortgage brokers can provide access to deals not available directly to consumers
- Communicate with lenders: Those concerned about affordability should contact their mortgage provider early to explore available options
The UK Finance spokesperson added: "If anyone is worried about their mortgage payment your lender is here to help. The earlier you contact your lender, the more options they will have available and the sooner they will be able to help you."
As 2026 approaches, financial advisors stress that preparation and research will be crucial for the nearly one million homeowners navigating this significant financial transition in the UK housing market.
