More than 1.8 million UK households face higher mortgage costs this year.
The warnings come as lenders respond to ongoing market turmoil, with experts urging homeowners to review their options carefully.
Virgin Money has already increased the cost of several fixed-rate mortgages this week, signalling a potential shift in the market.
Santander has warned it may need to “nudge up” prices in the short term, citing volatility in the bond market.
Frances Haque, chief economist at Santander UK, said: “This month, we’re already seeing swap rates edge up as they respond to volatility in the bond market, caused by an uncertain economic outlook for 2025 both at home and abroad.”
Around 420,000 households face a £500 a month hike next year, it has been warned
GETTY
Current mortgage rates show stark differences between available options, according to data from Moneyfacts compare.co.uk.
Standard variable rates (SVRs) currently average 7.81 per cent, significantly higher than other mortgage types.
In comparison, a five-year fixed-rate mortgage averages 5.25 per cent, while a typical two-year tracker stands at 5.47 per cent.
Experts warn that rolling onto an SVR could be costly for homeowners, as these rates typically remain high even if interest rates fall.
Tracker mortgages, which follow the Bank of England base rate, are emerging as a potentially more affordable alternative to SVRs.
These lower rates could mean substantial savings for households facing remortgage decisions in the coming months.
David Hollingworth, director at L&C Mortgages said: “It’s important to review your rate in good time so that you have time to arrange something and can switch smoothly.”
He adds that seeking advice helps track the best value, considering both rates and additional fees.
LATEST DEVELOPMENTS:
Andrew Montlake, of mortgage broker Coreco, suggests tracker mortgages could be a “smart choice” for some borrowers.
Montlake said: “They are good for those who believe we’re at or near the peak of interest rates and want to build in some flexibility.”
“Trackers work well for those with budget flexibility who anticipate rate decreases, while others might prefer fixed deals’ stability.
“Start by sorting out your budget and getting a good handle on what you can afford. Speak to a professional broker who can look at the best deals across the whole market.”
For homeowners seeking to manage their mortgage costs, overpayment could offer additional benefits. Making overpayments helps reduce debt faster and decreases the total interest paid over the loan term.
A lump sum overpayment can lead to lower monthly repayments in the future, as the overall loan amount decreases. This strategy could be particularly beneficial for those currently on low fixed rates who anticipate moving to higher rates when remortgaging.
Most lenders allow overpayments of up to ten per cent before applying penalty fees. However, experts stress the importance of maintaining adequate emergency savings before considering overpayments.
These funds should be reserved for unexpected expenses such as car repairs or household appliance replacements.
