For mortgage holders with fixed-rate deals set to expire within the next 12 months, the coming year presents a critical period for financial planning. As interest rates remain uncertain, those approaching the end of their fixed terms must prepare for potentially higher monthly repayments. Understanding market trends, exploring available mortgage products, and seeking expert advice can make a significant difference in securing an affordable deal.

The Bank of England continues with a measured yet cautionary outlook for UK homeowners, forecasting that a significant number of mortgage holders may face increased monthly payments over the next three years. 

These predictions arose against a backdrop of global economic challenges and shifting interest rates, though there are also factors tempering the potential impact.

Rising Payments for Millions by 2027

Projections from the Bank indicate that approximately 4.4 million households will see their mortgage payments rise by 2027. For around 420,000 households, these increases could amount to as much as £500 per month, signalling a considerable change in financial commitments that may affect household budgets and the broader economy.

However, the overall picture is not entirely bleak. A substantial portion of mortgage holders will not face higher costs. About 27% are likely to see their monthly payments decrease, and 23% will experience no change at all. These variations reflect differences in borrowing approaches and the evolving interest rate environment.

A Resilient Mortgage Market

Concerns about rising payments are mitigated by evidence that UK households are better prepared than previously anticipated. The Bank’s Financial Stability Report highlights that the proportion of households falling behind on mortgage payments remains low when viewed against historical trends. Additionally, the number of households allocating a large share of their income to mortgage costs is expected to remain stable, even as some payments increase.

Lower Than Predicted Payment Increases

Interest rate adjustments, which began in late 2021, have reshaped the mortgage market. Many fixed-rate deals are nearing their conclusion, and by the end of 2027, an estimated 2.7 million homeowners will refinance onto rates above 3% for the first time.

For the average owner-occupier, this transition is expected to result in a monthly repayment increase of £146 – a figure lower than previously forecast. This reduction reflects falling mortgage rates and the growing trend of borrowers extending their loan terms to make payments more manageable.

Navigating the End of a Fixed Term: A Timeline for Homeowners

Approaching the end of a fixed-rate mortgage term requires careful planning, and preparation is key to mitigating potential financial pressures. 

Homeowners with two years left on their current deal should take steps to ensure their finances are in order. This includes reviewing income, expenses, and credit scores, which can help ensure smooth affordability checks when the time comes to remortgage. 

As the term narrows to 12 months, monitoring market trends becomes more significant. Falling rates might suggest waiting before locking in a deal, but professional guidance at this stage can help homeowners weigh their options effectively. 

For those with just six months remaining, contacting lenders to secure a rate early is often advisable. Many lenders allow homeowners to fix a deal ahead of time, shielding them from potential future rate hikes and offering peace of mind.

Global Risks and the Strength of the UK Lending Market

The Bank of England has identified significant risks to global financial stability, which could indirectly influence the UK mortgage market. 

Geopolitical tensions, including the conflict in Ukraine and the Middle East, continue to exacerbate uncertainty. Simultaneously, trade disputes, cyber threats, and a growing fragmentation in international policy cooperation are heightening risks to the global economy.

Despite these challenges, the UK financial system remains robust. The Bank has reaffirmed that lenders are well-equipped to support both households and businesses, even in a worsening economic climate. 

This strength is underpinned by stringent regulatory frameworks, ensuring the resilience of financial institutions and their capacity to absorb potential shocks. For borrowers, this stability offers reassurance that support will remain available, regardless of broader economic uncertainties.

Sergiu Moldovan, Mortgage Broker & Protection Adviser in Harlow, Essex & Grays, Kent said: 

“In the face of fluctuating rates and a complex market environment, consulting a qualified mortgage broker can be invaluable. As Mortgage Brokers we have access to a wide range of mortgage products, with some not available on the retail market. We can provide tailored advice, helping homeowners navigate affordability checks and secure the most appropriate deal. Our expertise ensures that borrowers are well-informed and prepared to make financial decisions, particularly as pressures on household budgets increase.”

In Summary

While a significant proportion of UK mortgage holders are likely to see their payments rise in the coming years, others will face little to no change, and some may even benefit from reduced costs. 

Proactive planning and seeking professional advice are essential steps for homeowners preparing for these transitions. With the UK’s financial system maintaining a strong position to support borrowers, the outlook, while challenging, remains manageable for most.

Sources: https://www.bankofengland.co.uk/financial-stability-report/2024/november-2024

---

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

---

Approved by The Openwork Partnership on 13/06/2025.