Hundreds of thousands of fixed-rate mortgages to expire by the general election – how to cope with rising costs

Hundreds of thousands of mortgage borrowers will have seen their monthly repayments rise by the general election, making housing a key political issue, research suggests.

Yet there is very little promised in the general election manifestos on mortgage support.

Borrowers on fixed-rate mortgages over the past few years have been sheltered from interest rate rises.

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But data from UK Finance suggests around 700,000 fixed-rate mortgages have already expired this year and a total of 1.4 million borrowers will have needed to remortgage by the end of this year.

Meanwhile, technology firm Eligible, which uses artificial intelligence to analyse bank customers’ financial and behavioural data, estimates that 100,000 fixed-rate mortgages will end before the general election of 4 July.

That means that as the nation heads to the polls for the general election, many borrowers will be moving from historically low fixed rates of between 1% to 2% to an average of 5.97% for a two-year fix and 5.53% for five years.

A homeowner used to a 2% fixed rate for a £200,000 mortgage over 25 years would see their repayments rise from £848 per month to £1,285 if remortgaging to a two-year fix at 5.97%.

The figure could be higher for others and the Treasury launched a mortgage charter in June 2023 to help borrowers struggling with rising mortgage repayments.

Financial Conduct Authority (FCA) figures show around 1.1 million borrowers have benefited so far from the charter.

It comes amid hopes of an interest rate cut in the coming months that could bring mortgage pricing down, although analysts don’t expect this to happen until at least August.

Will the next government help with mortgage costs?

Despite the millions of homeowners set for increased monthly repayments and the hundreds of thousands already seeking support, the general election manifestos are relatively quiet on mortgage support.

Much of the general election housing policy focus is on first-time buyers, with the Conservatives pledging to maintain stamp duty thresholds for first-time buyers and Labour promising a permanent version of the Mortgage Guarantee Scheme known as Freedom to Buy.

“Public sentiment with this election with the people that I am speaking to is lack of trust on both parties,” says Michelle Lawson, director at Lawson Financial.

“This result of the election is going to be the least worst not the best person for the job in my opinion. Most borrowers whose product ends on or before 4 July should have done something by now - if not they are cutting it fine.

“The majority now have accepted their payments will increase and can absorb the rise however there will be some that will struggle.”

Scott Taylor-Barr, principle adviser at Barnsdale Financial Management, says most people are apathetic about the impact the election will have on their mortgage and general finances.

“Most borrowers I am speaking to are not struggling to meet their mortgage commitments,” he says.

“Many are tightening up on things, but that is more discretionary type spending, taking less holidays, keeping the car longer, or cancelling TV and music subscription services. Meeting their mortgage payment is an extremely high priority to them and so there are lots of other things that will be stopped first.”

How to cope with rising mortgage costs

Banks are still committed to the Treasury-backed mortgage charter, set up last year to help struggling borrowers remortgage to a new deal six months before their current one ends, switch to interest-only or extend their term to reduce repayments

FCA data between July 2023 and April 2024 shows 159,000 mortgages have either been switched to interest-only or had their terms extended so far.

Another 1.1 million have locked in another fixed rate before their current deal ends.

That is one method recommended by mortgage brokers to ensure you can secure a rate you are comfortable with.

It means you can apply for a deal early if you think pricing will increase, while having the freedom to change to a different product if rates drop.

Other options include overpaying your mortgage to reduce the term and overall debt.

Beyond any further mortgage support from the next government, many borrowers are waiting on the timing of the next interest rate cut as there is a risk of fixing now and paying over the odds or missing out on the best mortgage rates if a cut is delayed.

“Many advisers would say it’s a coin toss as to what will happen next with rates,” says Simon Bridgland, broker at Release Freedom.

“Simply get the best product available and hunker down, as turmoil ends as sure as it starts. Those struggling to meet payments and lucky enough to be with a lender who subscribes to the mortgage charter are taking advantage of its benefits.”