Proactive advice becomes critical as fallout from global tensions pushes mortgage costs higher
More than five million UK homeowners are now expected to face higher mortgage repayments by the end of 2028 – around a million more than the Bank of England forecasted last December – according to the Bank's Financial Stability Report.
The upward revision has been linked to pressure on rates stemming from the Iran war and its knock-on effect on borrowing costs.
The report also flagged that almost 750,000 homeowners currently paying less than 3% interest will roll off their fixed-rate deals this year, facing an average increase of £170 a month. By contrast, a typical owner-occupier coming off a fix in the next two years is likely to see a smaller rise of around £45 a month, considerably less than the £120 average increase seen among those remortgaging between the end of 2022 and end of 2024.
For Paul Hampton (pictured top), owner and mortgage consultant at Approved Mortgage Solutions in Sunderland, the headline numbers only tell part of the story. "The interest rates at the moment are normal," he told Mortgage Introducer. "We've had artificially low rates for the last 20 years, but that's all."
He pointed out loan sizes in his region are typically smaller, softening the impact locally even where borrowers face proportionally large rate increases elsewhere in the country.
Why don't the Bank's figures tell the whole story?
Hampton believes official projections underplay how households actually respond once affordability tightens. "All of the data, from what I can tell, assumes no change in personal habits," he said. "Your personal habits change based on affordability. If you were struggling to pay your mortgage, you wouldn't go to Costa twice a week." He estimated most people could typically find around £150 a month in savings from non-essential spending if they had to.
Hampton illustrated the point with a recent case, where a client coming off a 10-year fix at 2.99% onto a new deal at 4.39% saw a real-terms increase of just £15 a month, because the outstanding loan was only £20,000. He also pointed to how mortgage terms themselves can be used as a buffer against rate rises. "Your mortgage term is a very powerful tool," he said. "When interest rates are low, take your mortgage over a shorter period and overpay it. That gives you a little bit of flexibility so that if interest rates do increase, you can add a year or two onto your mortgage and that softens the blow."
On the specific cohort facing the steepest rises – the sub-3% borrowers coming off deals this year – Hampton said early engagement is critical. Brokers, he explained, try to get ahead of lenders' own contact windows: "If a lender contacts the clients three months in advance, we'd contact them four months in advance. If the lender contacts them four months in advance, we contact them five months in advance."
The obstacle, he said, is most lenders won't release current account data to brokers until three months before a deal ends, which he believes should change given the scale of the coming wave of clients approaching remortgage this year.
Geopolitical volatility hasn't reshaped pricing
Asked how the Iran war is feeding into conversations with borrowers, Hampton said swap rates – which underpin fixed mortgage pricing – have actually been easing, despite the volatility in headlines. He described lenders such as Coventry Building Society pulling and reinstating products within days: "They removed all the 85% products, and they brought them back today. They removed them because of business levels." His conclusion is that short-term noise obscures a steadier underlying picture: "There's lots and lots of volatility, but the net result isn't a massive change."
He pointed to his own tracking of one lender's two-year fixed rate over a 10-month period, during which the rate changed 16 times but moved overall from 5.79% to 5.89%. "There's lots of uncertainty, there's lots of press around lenders changing rates, but if you look back at the increases and decreases, I know which one's got the most news." His advice to brokers is to base client conversations on a straightforward before-and-after comparison against a single lender, rather than the cumulative noise of repeated repricing headlines.
Lenders must share data sooner
Hampton also renewed his call for lenders to take greater responsibility for warning borrowers when their current rate is markedly cheaper than anything on offer, tying the point to the "more holistic approach" he said Consumer Duty is meant to encourage – even if, in his view, it's "really hard to manage" in practice.
It's a tension other advisers expect to shape mortgage product design throughout the rest of the year, as lenders come under pressure to prove good outcomes rather than just tick the compliance box. Without earlier access to the data, Hampton said brokers are stuck reacting instead of planning ahead, and that's the gap he thinks matters most for borrowers facing the biggest increases.
Despite all the pressure in the figures, Hampton doesn't think it will translate into a wave of repossessions. "I think it's not going to mean a massive increase in repossessions because people will have to learn how to compromise."
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