The ultimate guide to beating mortgage hikes: Our experts reveal exactly what’s happening and how you can still grab a cheap deal

Homeowners have been dealt a fresh blow after average mortgage rates surged above 5 per cent for the first time since August. 

More than 25 of Britain’s biggest lenders have hiked the rates on their fixed home loans amid fears interest rates will stay higher for longer as the war in the Middle East fuels inflation across the world.

The cost of borrowing had been inching lower over the past year in a reprieve for homeowners trying to buy a home, move or remortgage. 

But this downward trend has slammed into reverse over the past two weeks. In the past 48 hours alone, almost 500 mortgage products have been withdrawn from the market, according to rates scrutineer Moneyfacts.

More than a million households due to come to the end of cheap fixed-rate deals this year now face higher monthly bills. 

Mortgage experts are urging homeowners to act quickly to lock in cheaper deals. 

So what can you do now if you’re remortgaging soon? And how long should you lock in for? We asked brokers and advisers for their action plan… 

Fixed rates on the rise 

The typical two-year fixed rate mortgage has surged to 5.01 per cent, up from 4.93 per cent yesterday and 4.83 per cent on February 27, before the conflict began.

The average rate is now at its highest level since August 6, according to Moneyfacts. 

The increases mean a homeowner with a £200,000 mortgage over 25 years will pay £252 more each year on a deal taken out now, compared with one available before the conflict began. 

Meanwhile, the average five-year fix is now 5.09 per cent, up from 5.03 per cent yesterday and 4.95 per cent before war broke out. 

Five years ago, in 2021, a total of 971,105 five-year fixed-rate mortgage products were taken out on interest rates as low as just 0.91 per cent. 

Back then, the average five-year fix was 2.75 per cent. Someone with a £200,000 mortgage over 25 years would have paid £922 a month. Today, that same deal would cost £1,180 a month.

While many households will still be able to secure rates well below the 5 per cent average by shopping around, the cheapest deals are vanishing at an alarming rate. 

In total, 28 lenders hiked rates in recent days. Today, TSB and Santander increased rates, following on from Halifax and Barclays yesterday and HSBC, NatWest and Nationwide Building Society on Monday.

Prior to the start of the conflict in the Middle East, the lowest two-year fixed rates were hovering just above 3.5 per cent.

Now, the best deals are around 3.75 per cent. Some brokers are warning that there will be no deals available below 4 per cent by the end of next week.

Someone locking in a five-year fix in March 2021 could have secured a rate as low as 1.19 per cent. On a £200,000 mortgage being repaid over 25 years that would have meant paying £771 a month.

Now, the lowest five-year fix for someone remortgaging is 3.89 per cent. On a £200,000 loan repaid over 25 years, that equates to paying £1,044 a month.

Why are rates rising? 

The war in the Middle East has stoked inflation fears. This is primarily due to soaring oil and gas prices, which push up costs across the economy. Traders who had previously been expecting interest rates to be cut this month are now betting on a base rate rise by the Bank of England this year. 

As these expectations feed through to the money markets, it becomes more expensive for lenders to offer mortgages – hence brokers predicting rates below 4 per cent may not be around much longer if the war drags on.

Lenders have been quick to react, with some repricing twice in the same week.

Today, TSB increased rates on all its products by 0.5 per cent having already repriced many of its deals on Monday night. And HSBC has just announced today that it will once again be raising rates tomorrow, having just done so on Monday. 

Nicholas Mendes, of mortgage broker John Charcol, says: ’HSBC’s move highlights how quickly lenders can respond when funding costs shift.’

What stands out here is just how widespread the hikes are. HSBC has increased rates across a broad range of residential and buy-to-let products, covering first-time buyers, home movers, remortgages and existing customers switching deals. 

Charcol says: ’When a lender of this size reprices across so many parts of the market it often signals margins are being squeezed.’

He adds: ’For borrowers, it’s another reminder that mortgage pricing can move quickly during periods of market uncertainty, so anyone approaching a purchase or remortgage may want to keep a close eye on rates and consider securing a deal early while keeping their options open.’

What you can do to keep costs down 

Brokers are advising households to lock in a deal now or risk substantially higher monthly repayments. 

Burying your head in the sand and hoping for a quick resolution in the Middle East is the worst way to react, they add.

Rates are rising fast and deals are being withdrawn. Over the past 48 hours, 472 mortgage products have been withdrawn from the market, according to Moneyfacts.

That’s around 6.5 per cent of the total mortgage market, which now stands at 7,164 available products. 

It’s the biggest fall in available mortgage products since the aftermath of the disastrous Liz Truss mini-Budget in September 2022. 

For those due to remortgage this year, the first thing to do is to make sure you’re moving to the best deal available. This means speaking to your broker or your lender and locking in a new rate as soon as possible.

It is possible to reserve a new mortgage rate as early as six months before your current one ends. 

Someone with a mortgage deal ending in September or before should try to lock in a rate now. If the situation changes and rates begin to fall again, it is usually possible to abandon your current deal in favour of a new one until just before the new mortgage begins. 

Doing nothing is the worst thing you can do. Anyone who allows their current deals to expire without remortgaging will fall on to their lender’s standard variable rate – the default rate borrowers are put on when their fixed rate ends. This can be 7 per cent or even higher.

Use an online tool such as This is Money and L&C’s mortgage finder to see the best rates you can get, and consider using a mortgage broker to help you find the right deal for your circumstances. Many are fee-free for the borrower and charge their fees to the lender you choose instead. 

Homeowners could also consider using savings to pay down some of their mortgage. This could reduce the monthly payments even as interest rates rise.

This could be particularly helpful if doing so would push you into a lower loan-to-value band. For example, you might pay off some of the loan so that the equity in your home goes up from 10 per cent to 15 per cent. This would move you from a 90 per cent mortgage to an 85 per cent deal, giving you access to better deals.

However, only do this if you don’t need the money as a rainy day fund or to pay down other more pressing debts.  

Another way to lower your monthly bill is by lengthening the term when you come to remortgage. 

The mortgage term is the number of years someone agrees to repay their mortgage for. Historically, this was 25 years for nearly all customers. But now borrowers often choose 30 years or even longer.

By lengthening the term of a mortgage, a borrower spreads their repayments over a longer period of time. This reduces the monthly cost. However, the downside is that interest is charged for a longer period, so the total you pay over the course of the loan will increase. It can add tens or even hundreds of thousands of pounds to your costs. 

It is therefore not a decision to be taken lightly. 

For example, someone with a £200,000 mortgage paying 4 per cent interest over 20 years would face monthly repayments of £1,212, paying a total of £290,769 over the lifespan of the mortgage.

Conversely, someone with a £200,000 mortgage paying the same interest rate over a 40-year term would face monthly repayments of £835.

However, they would pay £400,981 over the lifespan of the mortgage – £110,212 more than on a 20-year term.

While their interest rate would be likely to change during this time as they remortgage, the principle remains the same.

Ideally, borrowers who lengthen their mortgage term in order to reduce monthly bills treat it as a short-term measure. They can then find a way to overpay their mortgage – or shorten the term again – further down the line. 

Another way borrowers can reduce monthly payments is to switch to an interest-only mortgage. Though again, this comes with a major warning and should be viewed as a temporary measure.

With an interest-only mortgage, borrowers will only pay the interest each month, with the loan amount remaining the same.

This differs from a repayment mortgage where homeowners pay back a part of the loan, as well as the interest, each month until they eventually pay off the mortgage.

With interest-only, the monthly payments will be lower – but at the end of the mortgage term, the full amount borrowed will need to be repaid in one lump sum. If the homeowner doesn’t have the means to do so, they will need to sell their home to pay back the bank. 

However, it is possible to fix for two years on an interest-only deal, and then switch back to a repayment option. This means you could significantly cut your monthly costs down during two years in the hope that rates are lower when you next need to remortgage. 

Most mortgage deals allow borrowers to make overpayments of 10 per cent of the total mortgage amount each year without incurring penalty charges – so it would still be possible to pay off chunks of the mortgage on a voluntary basis.

Someone with a £200,000 mortgage being repaid over 25 years on a rate of 4 per cent will pay £1,055 a month. If they switched their mortgage to an entirely interest-only deal their monthly costs would fall to £666.

Borrowers seeking an interest-only mortgage for their own home are subject to much stricter lending criteria, so it is worth speaking to a mortgage broker before you take this route.

Should you fix for two or five years?

Choosing how long to fix for depends on what you think will happen to interest rates. But importantly, it should also take more account of your personal circumstances.

Two-year rates are the cheapest options, but borrowers need to think carefully about whether longer-term security would suit them better. With the conflict in the Middle East, this is now particularly important.

Other factors to consider include product fees, whether you may move house soon, how much you prefer the security of fixed payments and how well you could cope with a rise in mortgage bills.

Those opting for a shorter two-year fix are backing interest rates falling over the next couple of years, or at least staying steady, so that when it is time to remortgage their bills won’t rise.

With five-year fixes borrowers are locking into rates for longer either because they believe rates may rise or because they simply prefer the security of knowing their monthly outgoings. Five-year fixes were hugely popular when rates were lower, but now two years are often preferred by households.