Nearly one million homeowners across the UK could be in for a significant financial shock as their five-year fixed-rate mortgage deals approach renewal in 2026, with many facing the prospect of substantially higher monthly payments compared to the ultra-low rates they secured back in 2021.
The Scale of the Renewal Challenge
According to data obtained from the Financial Conduct Authority through a freedom of information request on behalf of Compare the Market, a total of 971,105 regulated five-year fixed-rate mortgage products were opened in 2021. This substantial figure represents homeowners who locked in their mortgage terms during a period of historically low interest rates, with many securing deals below 2%.
The data specifically covers regulated mortgages, which typically include owner-occupier residential mortgages, but excludes buy-to-let and commercial mortgages for which equivalent FCA data isn't collected. It's important to note that this total doesn't account for mortgages that may have been paid off early before reaching their renewal date in 2026.
From Ultra-Low to Current Market Rates
The mortgage landscape has transformed dramatically since 2021. While sub-2% five-year rates were widely available during that period of low interest rates, mortgage costs subsequently jumped significantly before edging down more recently. The Bank of England's decision to cut the base rate by 0.25 percentage points to 3.75% in December has provided some relief, but rates remain substantially higher than those available five years ago.
According to data from L&C Mortgages, the average of the lowest remortgage five-year fixed rates across the ten biggest mortgage lenders stood at 3.89% in January 2026. This represents a significant increase from the ultra-low rates many homeowners secured in 2021, potentially creating substantial payment shocks for those coming to the end of their fixed terms.
Potential Financial Impact on Households
Calculations by Compare the Market indicate that the transition to more costly rates could potentially push up some households' annual mortgage payments by as much as £2,124. This calculation is based on average house prices in 2021 and assumes the homeowner had a 25% deposit when they initially secured their mortgage.
The situation could be particularly challenging for borrowers who allow their five-year mortgage to automatically roll onto a standard variable rate (SVR) when their initial fixed deal ends. Standard variable rates typically represent the most expensive mortgage option and could result in even more substantial cost increases compared to securing a new fixed-rate deal.
Expert Advice for Navigating Renewal
Sajni Shah, a mortgage expert at Compare the Market, warned that many households "will be shocked" to see their repayments jump significantly. She emphasised the importance of careful comparison shopping, noting that "even small differences in rates can add up to thousands over the life of a term, so 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, acknowledged that while a payment increase is inevitable once a fixed-rate deal ends, there is some positive news. "Mortgage rates have improved substantially recently and are much lower than at the peak," he explained. "That will help to limit the increase, but it makes shopping around for the best deal even more vital. Starting the process several months in advance will help borrowers prepare for higher rates and enable a smooth transition to a new deal."
Both experts stressed that borrowers need to consider the overall cost of any new mortgage, including arrangement fees and other charges, rather than focusing solely on the interest rate.
Broader Market Context and Support
A spokesperson for UK Finance provided additional context, noting that approximately 1.8 million households are due to come off fixed-rate deals this year, with around half of these expected 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," the spokesperson said.
For those concerned about their ability to manage increased mortgage payments, the UK Finance spokesperson offered reassurance: "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."
This advice underscores the importance of proactive engagement with lenders well before existing mortgage deals expire, particularly for those who secured their current mortgages during the period of historically low interest rates that characterised the 2021 mortgage market.
