Halifax said that there were an estimated 135,000 five-year fixed rate deals taken out in the last three months of 2020, when rates were at “historic lows” with the average five-year fixed rate during that time at 2.4%.
Assuming a five-year fixed deal with the above rate on a 25-year term and loan amount of £210,000, monthly repayments would come to £932.
For an interest-only mortgage with the same terms, monthly repayments were estimated at £420.
Halifax said that these borrowers could see the interest rate they pay almost triple if they moved onto a lender’s standard variable rate (SVR), with the average SVR being around 6.9%.
The bank added that a remaining debt of around £177,000 would cause monthly repayments to rise to £1,361 per month, an increase of £429. For interest-only deals, the monthly increase would be £788.
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Halifax said that there are “good, fixed rate deals available that will soften the effects of super-low rates ending”.
For instance, remortgaging a repayment mortgage to a Halifax loan for a five-year fixed rate with no fee at 4.24% could save £260 per month compared to moving on to an average SVR. Monthly repayments are estimated at £1,095.
Interest-only mortgage customers’ payments would be £773, over £430 lower than being on an average SVR.
Andrew Assamm, mortgage director at Halifax, said: “While interest rates are higher than they were five years ago, for people coming to the end of their current fixed rate, taking earlier action can help minimise the jump in monthly payments they may be expecting.
“It’s never been easier for people to switch lenders to get a better deal. As well as a range of competitive remortgage products to help borrowers soften the effects of today’s higher rates.
“Acting now gives you the certainty of knowing you won’t see a bigger rise in your monthly payments than necessary, while still giving you the flexibility to choose another deal if rates continue to drop in the meantime.”
