Table of Contents
- What Does Remortgaging Look Like Today?
- Why Are Mortgage Costs Increasing?
- How Are Customers Adapting To Higher Mortgage Rates?
- The Bigger Picture: Rising Household Costs on Top of Higher Mortgages
- What Can Homeowners Do?
- Get Help with Higher Mortgage Costs
Many homeowners across the UK are braced for mortgage hikes as their five-year low-rate deals come to an end in 2025. In 2020, mortgages were historically low, with two-year fixed rates around 2.5% and five-year deals at roughly 2.7%. Fast forward to 2025, and the landscape looks very different. Average two-year fixed rates now sit at approximately 4.55%, while five-year fixed deals hover around 4.57%.
For millions of households, this means a sudden jump in monthly payments, a shock that can put real strain on their every day budgets.
What Does Remortgaging Look Like Today?
Remortgaging in 2025 is more complex than it was a number of years ago. Mortgage rates are still under pressure, with gilt yields recently climbing to their highest point in nearly three decades. Lenders are pricing in this uncertainty, which means significantly less lower deals, and stricter affordability checks for borrowers.
Homeowners who are coming off historically low mortgage rates may feel a shock as they’re presented with the new rates. A mortgage that once felt comfortable may now stretch your budget, particularly if you’re already juggling other debts or rising household costs.
Why Are Mortgage Costs Increasing?
After years of record-low borrowing costs, many homeowners are now feeling the squeeze as their mortgage deals come to an end. While rates aren’t climbing sharply in 2025, they have settled at levels that are much higher than what households grew accustomed to in 2020. The difference between paying 1-2% and refinancing closer to 4% might not sound huge at first glance, but for the average mortgage holder it can be hundreds of pounds extra each month.
This shift is being driven by a mix of economic and market factors that continue to put pressure on the cost of new deals:
Expiring fixed-rate deals: Many households locked into ultra-low rates between 2020 and 2021. As those deals end, borrowers must refinance at today’s higher levels.
Money market swap rates: These rates largely dictate how lenders price fixed-rate mortgages. With swap rates elevated, new mortgage deals remain more expensive.
Persistent inflation: Although inflation has cooled since its peak, it remains a factor influencing borrowing costs and lender caution.
Economic uncertainty: The Bank of England has cut its base rate slightly, but lenders are keeping rates higher to protect against wider financial risks.
The result is that while interest rates aren’t spiralling upwards like they did in 2022–23, they remain well above the lows many homeowners have become used to.
How Are Customers Adapting To Higher Mortgage Rates?
Households facing higher mortgage rates across the UK are responding in different ways, including:
Budget tightening: Many are cutting back on non-essential spending to absorb higher mortgage costs.
Seeking advice: Homeowners are increasingly turning to brokers or advisers to find the best possible remortgage deal.
Overpayments (where possible): Some households are paying extra towards their mortgage balance while still on lower rates, to soften the impact of future rises.
Debt juggling: Unfortunately, others are relying more heavily on credit cards, overdrafts, or short-term loans to make ends meet, which can create longer-term financial stress.
The Bigger Picture: Rising Household Costs on Top of Higher Mortgages
For many households, higher mortgage payments are only part of the story. Everyday costs have been climbing steadily in recent years, and the added pressure can make it harder to keep up with essential bills. Council tax rises, higher energy bills, and the increasing price of food all chip away at monthly budgets, leaving less room to absorb the jump in mortgage costs.
This combination means that even families who were previously comfortable are now finding themselves stretched. The challenge isn’t just the mortgage itself, it’s the overall cost of living, and how each expense adds up. When money feels tight across the board, it’s easy to see why many homeowners start to rely on credit cards, overdrafts, or short-term borrowing to bridge the gap.
That’s why taking a step back and looking at your whole financial picture is so important. If mortgage hikes are hitting at the same time as other household bills, speaking to a debt advisor could help you regain control and ease the pressure on your budget.
What Can Homeowners Do?
If your mortgage deal is ending soon, or you’re already struggling with higher payments, there are practical steps you can take:
Talk to your lender early: Lenders may offer tailored support, such as extending your term or switching to a different product.
Review your options: Locking in a deal before your current rate ends could protect you from further changes in the market.
Seek debt advice: If higher mortgage payments are stretching you to breaking point, debt solutions like a Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA) could help you reduce other monthly commitments and protect your home.
Don’t wait until arrears build up: Acting early gives you more options and peace of mind. Free financial assessment,
Get Help with Higher Mortgage Costs
If rising mortgage payments are stretching your budget, you don’t have to face the pressure alone, debt help is available. At PennyPlan, we specialise in helping homeowners find debt solutions that ease monthly outgoings and protect what matters most, your home.
Our friendly advisors can:
– Review your full financial situation.
– Explain the options available to reduce your monthly commitments.
– Help you take control before arrears or missed payments build up.
Start your journey with PennyPlan and get in touch with us today.
