MORE than a million households are set to see a big jump in mortgage bills this year but there are plenty of ways you can act.
A whopping 1.8 million fixed-rate mortgages are set to come to an end, according to data from trade body UK Finance, and many of these bill payers face a big jump in rates.
Millions of mortgages are set to come to an end this year with homeowners facing a bill hike[/caption]
We’ve spoken to mortgage expert Nicholas Mendes, from top broker John Charcol, who has given out millions of pounds in mortgages.
He shares his must-read tips to help YOU avoid a mortgage bill shock this year.
Taking notes of these tips could help shave off £100s off your mortgage.
What is happening?
Mortgage bills are jumping – here’s why.
People who are coming to the end of a fixed-rate mortgage from two or five years ago will have taken out a deal when rates were much lower.
Since then the Bank of England base rate has increased which impacts mortgage rates.
Currently, the average two-year fixed rate mortgage stands at 5.35% while the typical five-year rate is 5.19%, according to data from moneyfacts.co.uk.
By comparison, anyone who took out their deal five years ago enjoyed an average two-year rate of 2.43% and a five-year fix of 2.74%.
For someone with a £300,000 mortgage who took out a five-year fix in 2020 could have expected an average repayment of £1,382 a month.
By comparison, a £300,000 mortgage on a typical five-year fix today is now £1,787 per month.
That’s a whopping increase of £405 a month or £4,860 over a year.
For many this is a worrying rise – but there are ways to take control and manage costs.
Nicholas said: “With 1.8 million homeowners set to reach the end of their fixed-rate mortgage deals in 2025, many of whom secured ultra-low rates below 2% during the post-pandemic years, navigating the mortgage market this year will be more critical than ever.
“The UK mortgage landscape has shifted significantly over the past few years.
“Now in 2025, mortgage rates have stabilised, with expectations of further rate reductions depending on economic performance.
“Despite this, those coming off fixed deals below 2% will likely face a steep increase in repayments, even with the slightly improved rates now available. This makes early preparation essential.”
Here Nicholas explains step-by-step what you should do.
Update your mortgage term
When you apply for a new mortgage, repayments are calculated over a set time period which can be anywhere between 20-40 years.
If you are struggling with an increase in bills, one way to lower repayments is to stretch the mortgage term – meaning you are paying off the debt over a longer period of time.
Opting for the longest possible mortgage term will reduce your bills making them more manageable in the short term.
On a £250,000 mortgage and a 5% rate, you’d pay £1,461 a month on a 25-year term.
However, if you increased the term to 35 years you’d pay £1,261 a month if all other factors remained the same. That works out at £200 less a month.
It’s important to note that repaying your mortgage over a longer time frame means that you ultimately pay more in interest on the debt.
If you do increase your mortgage term, it’s a good idea to bring it back down as and when you can to avoid paying considerably more interest.
Most major lenders have a mortgage overpayment calculator on their websites, including HSBC and Santander.
The tools show the difference between regular overpayments as well as a lump sum.
You can see how much earlier you’ll pay off your mortgage and how much you’ll save in interest.
Fix your deal for longer
If you’re coming to the end of your mortgage term and are looking to get the lowest possible repayment, it could be worth fixing for longer.
As mentioned above, the two-year is 5.35% compared to 5.19% for a five-year deal, according Moneyfacts.co.uk.
The risk you take is that in two years time, rates could be significantly cheaper leading you to miss out.
However, no one knows what will happen for certain. And taking out a longer fix can help you plan your finances and budgets over a longer term.
A broker should be able to help work out if it’s a good idea to fix on a deal for longer.
A part-and-part mortgage, combining fixed and tracker rates, is one way of enjoying the best of both worlds, according to Nicholas.
There are a few options that mean you could get better mortgage rates when renewing[/caption]
He said: “This type of mortgage divides the loan into two portions: a fixed rate portion and a tracker rate portion.
“The fixed rate ensures consistent monthly payments, protecting borrowers from interest rate fluctuations for a set period, which helps with budgeting and financial planning.
“The tracker rate, on the other hand, varies according to the Bank of England base rate. When interest rates reduce, this portion can significantly reduce monthly payments.
“This combination can lead to substantial savings over the mortgage term, as it balances the predictability of fixed rates with the potential cost savings of tracker rates.”
Overpay your mortgage
If you have spare cash, putting it towards paying more off your mortgage can bring down monthly costs ahead of locking into a new rate.
Over payments go towards eroding the underlying debt of the loan, which is what is used to calculate interest.
A lower outstanding debt means lower interest payments.
In most cases, lenders will let you pay off up to 10% of your total mortgage in one year.
Overpaying could be a good idea if you come into a lump sum of cash.
Or if you can pay even £20 extra a month it will make a difference in the long term.
However, it’s important to follow your lender’s rules on over payments or you could be hit with an ‘early repayment charge’ which can be very costly.
Just ask your lender if you aren’t sure as they should be able to tell you.
How we use cashback to overpay our mortgage
KIERAN Rossi, 46, and his wife Chantal, from Redhill, Surrey overpay their mortgage each month using cashback and are set to save thousands in interest, as a result.
Dad-of-four, Kieran uses the free app Sprive to get cashback on spending worth around £40 each month, including with delivery apps Just Eat and Deliveroo, as well as Sainsbury’s and Boots.
The cashback automatically links to their mortgage account to pay off their debt, on top of their usual monthly repayments.
Kieran has worked out they are on track to save £11,902 in interest payments and pay the mortgage off one-and-a-half years early, as a result.
The safety engineer started using Sprive in January 2024 and has since earned cashabck worth £542, which has gone toward his mortgage .
Kieran said: “I have always wanted to pay down the mortgage with overpayments but never had the spare funds or an easy way to do it – this apps provides a quick and easy solution to both issues.”
Use a broker
Searching for a mortgage deal is not always easy but a good broker can help you.
Sometimes opting for a lower mortgage rate is not always the best option if it comes with a sizeable fee or charge.
In these circumstances, it can be hard to compare the overall true cost of two different deals.
Often it comes down to your individual borrowing amount and a big product fee can sometimes be worthwhile to get a lower rate.
However, a good mortgage broker should be able to help with the sums and work out the best deal.
Some mortgage brokers charge a fee but not all, you want a broker who can search the whole market.
Ask friends or family for recommendations and then look online for reviews. You can see recommendations for advisers at unbiased.co.uk.
What are your remortgage options
When you come to the end of a mortgage deal, your existing lender will usually offer you a fresh rate for you to switch on to.
This is what’s known as a ‘product transfer’ and your lender typically makes it fairly easy to move on to this new rate.
However, by searching the market and going through a full remortgage process you could find a much better deal – even though it may mean more upfront paperwork, the savings could well be worth it.
Even what seems like a small rate difference of 0.2%, for example, impacts your bills – all the more so if you have a larger mortgage.
For example, a 4.5% rate on a £350,000 mortgage would mean a monthly repayment of £1,945.
A rate of 4.7% means the bill rises to £1,985, that’s an extra £40 a month and a hefty £480 over a year.
A good mortgage broker can help find the best remortgage deal for your circumstances and compare it to a product transfer rate offered by your lender.
Nicholas says: “While a product transfer with your current lender is convenient, switching to another lender could save you thousands over the course of your mortgage.
“Reviewing your options at the end of every fixed term ensures you’re always getting the most cost-effective deal.”
How to get the best deal on a mortgage
There are different factors that go into getting the best mortgage rate. Chris Sykes, technical director at broker Private Finance explains what you need to know.
- Bigger deposit
The larger the deposit you have the lower the rates you’ll have access to.
The different deposit tiers offered by lenders are generally 0-1% deposit, 5%, 10%, 15%, then generally it skips to 25% and finally cash or equity of 40% or more.
There are some exceptions in between but these are usually the bands.
Lenders then set different rates for each of these tiers, rather than having one rate for a 12% deposit and another for 14%, for example.
With a deposit above 40% there is usually no price fluctuation, which means you’d get the same rate with a 50% deposit to a 40% deposit.
- Keep your credit score healthy
A better credit score doesn’t necessarily mean more competitive deals, but a negative credit could mean worse deals.
For example, there may be some people with not a lot of credit as they’ve never had a credit card, or loan, will get the exact some deal as someone who has more credit history and a better credit score.
However, a bad credit history or score starts to limit your lenders and means you may need to move off high street to a more specialist lender which tends to offer higher rates.
If you have poor credit, look for easy ways to improve it.
- Look six months before your fix ends
It’s best to look at deals six months before a current rate ends. This might be to just have a chat with a broker and get things moving.
It might be that you can get a deal lined up and locked in that protects against movements in interest rates – for example if rates were to go up over the following six months. And you can also then improve the rate within that six months if rates were to go down.
- How to find a good broker
A good mortgage broker is invaluable for navigating the options available to you.
The best way to find a good adviser is through personal recommendations, everyone has a friend or family member who will have recently bought or refinanced – ask them who they used and if they were happy with the service.
You can also lookup reviews of that person online to find other customer experiences too. Unbiased.co.uk is one place where people can offer their reviews.
- Sort your paperwork
IF you are looking to buy or remortgage, contact a broker nice and early, as they can then guide you through what the expectations are from lenders.
This gives you plenty of time to make sure your accounts are up to date if you’re self-employed and you can see if it is worth filing tax returns early.
Energy savings = mortgage savings
An energy-efficient home can unlock lower mortgage rates, especially if you’ve had work done since you last took out a mortgage fix.
When a home goes on the market or is rented out it needs to have a Energy Performance Certificate (EPC) which grade the energy efficiency of your home.
This EPC (Energy Performance Certificate) lasts for ten years.
If you’ve had loft insulation or made other improvements to lower energy bills, it may be worth finding out the latest EPC rating, Nicholas said.
This is because a better EPC rating can mean better rates, as more lenders offer better ‘green mortgages’ or preferential rates for homes that have an EPC of C or higher.
He added: “Energy Performance Certificates (EPCs) are now playing a role in mortgage pricing.
“If you’ve made energy efficiency improvements, getting an updated EPC before remortgaging could help you access better mortgage deals. Many lenders are keen to support environmentally friendly homes.”
Different types of mortgages
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.
