The cheap five-year mortgage deals agreed in 2021 are giving way to a much more expensive renewal market. New L&C analysis puts the increase in annual repayments at almost £5,000 on a £200,000 mortgage.
The comparison, reported by Mortgage Soup on 4 November, shows average five-year fixed remortgage rates among ten leading lenders rising from 1.30% in November 2021 to 5.16%. On its 25-year repayment illustration, the monthly bill increases from £781 to £1,188.
That is a £407 monthly increase using the published rounded payments, or £4,884 over a year. For households whose budgets have been built around a low fixed payment, renewal can now absorb money previously available for savings and everyday spending.
L&C’s repayment comparison
November 2021: £781 a month.
November 2026 comparison: £1,188 a month.
Annual difference: £4,884.
Both calculations use a £200,000 repayment mortgage over 25 years. The comparison holds the balance and term constant to show the effect of the rate change.
Willow’s recent coverage of the coming remortgage wave examined the scale of renewals and the effect of fees and longer terms. The new figures raise a more immediate question: how much of this increase will reach the household’s bank account once five years of repayments are taken into account?
The mortgage being renewed may be smaller than the one agreed in 2021
A repayment mortgage gradually reduces the amount owed. Someone who originally borrowed £200,000 five years ago would therefore normally reach renewal with a lower balance, provided they have made the scheduled payments without adding further borrowing.
To follow that journey, Willow has calculated a separate example starting with £200,000 at 1.30% over 25 years. After 60 monthly payments of approximately £781.22, the outstanding balance would be about £165,022, with 20 years left on the original timetable.
Refinancing that remaining debt at the research’s 5.16% benchmark, while keeping the original repayment end date, produces a monthly payment of approximately £1,103.71.
| Measure | At the start in 2021 | After five years, at renewal |
|---|---|---|
| Mortgage balance | £200,000 | Approximately £165,022 |
| Repayment term remaining | 25 years | 20 years |
| Illustrative interest rate | 1.30% | 5.16% |
| Monthly repayment | £781.22 | £1,103.71 |
The annual increase in this example is approximately £3,870. The debt already repaid softens the impact, but the household still needs to find roughly £322 extra each month.
Both comparisons are useful. L&C isolates the change in rates; the second follows a loan as its balance and remaining term reduce. A borrower’s own renewal calculation needs their expected balance at expiry, including any overpayments, further advances or fees added to the loan.
A small rate improvement helps, but leaves most of the increase intact
Borrowers watching lenders adjust their prices may hope that a modest reduction will substantially change the renewal bill. On this example, the difference between available rates needs to be put into pounds.
Keeping the approximately £165,022 balance and 20-year term, a hypothetical rate of 4.91% would produce a payment of £1,080.88. That is about £23 less each month than at 5.16%. At 5.41%, the payment would be £1,126.79, about £23 more.
These are sensitivity calculations, not quotations. They show why securing competitive pricing remains worthwhile, while also explaining why a small rate cut cannot reverse the move away from a 1.30% deal.
The distinction matters when planning the household budget. A family may be able to accommodate a £23 variation between replacement deals while still needing to make a substantial adjustment for the larger increase from its existing payment.
Cash savings can change the payment, at a cost to flexibility
Some borrowers will reach renewal with savings they could use to reduce the mortgage. In the same example, paying £10,000 towards the balance before refinancing would leave approximately £155,022 to borrow.
At 5.16% over 20 years, the recalculated payment would be about £1,036.82, roughly £67 less per month. That reduction includes the effect of repaying less capital through future instalments; it should not be described as an investment return on the £10,000.
The household would also have £10,000 less accessible cash. For someone expecting home repairs, irregular earnings or a period away from work, retaining that reserve may be more valuable than reducing the monthly bill.
MoneyHelper’s guidance on early repayment highlights the importance of retaining reserves and checking charges. The timing matters: reducing the loan while the old fix is still running can have different consequences from contributing cash when it ends.
The property valuation can affect which deals are available
Five years of repayments may also have changed the mortgage’s loan-to-value ratio, which compares the debt with the home’s accepted value. That can influence the range of deals open to the borrower.
Take a separate example of £200,000 outstanding on a property valued at £330,000. The loan-to-value ratio is approximately 60.6%. Reducing the borrowing to £198,000 would bring it to 60%.
If a suitable lender offers different pricing at that boundary, a £2,000 contribution could affect the rate available on the remaining loan as well as reducing the balance. The actual benefit would depend on the product, fees and accepted valuation.
If the lender instead values the property at £320,000, reaching 60% would require the loan to fall to £192,000. The cash needed becomes £8,000. That is why an estimated property value should be checked before a borrower commits savings to a refinancing plan.
The renewal offer needs to fit the borrower’s finances today
Much can change during a five-year fix. A salaried borrower may now run a business; a couple may have childcare costs; a homeowner may have reduced their hours. The mortgage being renewed can be smaller while the financial assessment becomes more complicated.
A product transfer with the existing lender belongs alongside new-lender offers in the comparison. MoneyHelper notes that some transfers do not require a fresh affordability assessment, whereas moving lender involves checks on income and expenditure.
For borrowers with substantial mortgages, the absolute payment increase can be considerably larger. Under L&C’s unchanged-balance assumptions, scaling the loan from £200,000 to £500,000 multiplies the repayment difference by 2.5. Significant property wealth does not necessarily provide the monthly cash needed to meet it.
A mortgage with several parts needs closer attention. A homeowner may have the original purchase loan and a later advance for improvements, with different rates and expiry dates. Applying the same increase to the whole balance would give a misleading result if only one part is being renewed.
For that borrower, the immediate question is what the expiring portion will cost and when the next portion changes. A household payment forecast can show those stages separately, helping the owner decide how much of today’s surplus needs to be retained for a second increase later.
From a national comparison to an individual renewal figure
The useful starting point is the current mortgage statement and fixed-rate expiry date. A review can then establish the expected balance at renewal and compare replacement payments over the same remaining term, with fees shown separately.
Where the increase is uncomfortable, alternative terms or repayment arrangements need their own comparison, including the debt left outstanding. Changing the monthly bill can also change how quickly the mortgage is repaid.
Starting around six months before expiry leaves time to examine those choices and check when a replacement deal could begin without an early repayment charge. Willow can compare suitable renewal and remortgage options, including the effect of a cash contribution, so borrowers can plan around their own increase.
Is your five-year fix approaching its end?
Willow can compare your current lender’s renewal offer with suitable remortgages, using your expected balance, property value and remaining term to establish the payment change.
Explore Your Mortgage OptionsFrequently asked questions
Will everyone leaving a five-year fix pay £4,884 more a year?
No. L&C’s illustration compares the same £200,000 balance and 25-year term at two different rates. Your increase depends on the balance and term remaining, the rate you are leaving and the replacement deal.
How does repaying capital during the fixed period change the result?
In Willow’s example, a £200,000 mortgage starting on a 25-year term at 1.30% falls to about £165,022 after five years of scheduled payments. At 5.16% over the remaining 20 years, repayments become approximately £1,103.71 a month, an increase of about £3,870 a year.
Could a cash repayment reduce the new monthly payment?
Yes, if the replacement mortgage is calculated on the lower balance over the same term. In the worked example, repaying £10,000 before refinancing reduces the payment by about £67 a month. That uses £10,000 of cash and is not an investment return.
Should I compare my current lender with other lenders?
Yes. A product transfer keeps the mortgage with your existing lender; a remortgage moves it elsewhere. Compare the available rates, fees, eligibility and terms using the same balance and repayment period.
When should I start reviewing my mortgage?
Starting around six months before the fixed rate ends allows time to compare options. Offer validity and switching arrangements vary by lender, and the expiry date of any early repayment charge should be checked before setting a completion date.
About the author
Wesley Ranger is a director of Willow Private Finance. His work covers residential mortgages and specialist property finance, including complex income, higher-value borrowing and remortgages.