Mortgage warning as 69,000 households face 'unpleasant start to 2026' - bills could climb by £321 a month

Approximately 69,000 households across the country are bracing for a substantial jump in their monthly mortgage costs as bargain five-year fixed-rate deals secured during the pandemic reach their conclusion this month.

According to analysis from financial comparison service Nous, these homeowners locked in rates below two per cent back in January 2021, when the Bank of England base rate sat at just 0.1 per cent.

Those borrowers must now navigate a dramatically different lending landscape, with typical remortgage rates averaging 4.9 per cent.

For many, the timing could hardly be worse, arriving as households continue to grapple with elevated living costs and persistent inflationary pressures across the economy.

The financial burden translates to a monthly increase of roughly £321 for someone with a typical £200,000 mortgage, pushing repayments from £836 to £1,157.

Over the course of 2026, affected borrowers will need to find an additional £3,852 to cover their housing costs.

Crucially, homeowners who fail to actively remortgage face an even steeper penalty, as lenders will automatically move them onto standard variable rates that can exceed seven per cent.

Taking action is therefore essential, though the process of securing a new deal can prove both complex and stressful for many families. Those with stronger financial positions may fare somewhat better in the current market.

Borrowers holding 40 per cent equity in their property and maintaining a solid credit history can potentially access rates as low as 3.7 per cent, which would mean monthly payments of £1,022 on a £200,000 loan over 25 years.

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Greg Marsh, chief executive of Nous, told This is Money: "Tens of thousands of homeowners coming to the end of cheap five-year deals are in for an unpleasant start to 2026."

He added: "These households are only just being hit by higher interest rates, and face paying thousands of pounds more each year just to stay in their homes."

Mr Marsh emphasised that remortgaging is already a complicated and time-consuming process, with rising rates adding further anxiety for those navigating the system.

"My advice is to seek professional guidance early to make sure you're getting the right deal for your circumstances," he said.

The Nous chief executive noted that most people struggle to keep on top of the administrative demands involved in securing competitive deals, often resulting in significant overpayment on essential household bills.

Using a mortgage broker can help borrowers find better rates, and these services are frequently offered at no cost to the customer.

The current elevated mortgage rates trace back to the turmoil sparked by Liz Truss's mini-Budget in late 2022, which sent bond markets into chaos and drove up borrowing costs sharply.

Rates climbed further throughout 2023 as the Bank of England raised the base rate repeatedly in response to stubborn inflation.

According to MoneyfactsCompare, average two-year fixed deals peaked at 6.86 per cent in July 2023, while five-year products hit their highest point of 6.51 per cent in October 2022.

Costs have gradually eased over the past twelve months, particularly following a competitive push among lenders in December ahead of the base rate reduction.

Adam French of MoneyfactsCompare suggested that should the base rate drop to between three and 3.5 per cent this year, average mortgage rates could settle around four to 4.5 per cent.

He cautioned that this remains considerably above the ultra-low borrowing costs that households grew accustomed to during the previous decade.