‘Painful’ mortgage warning for 700,000 households as rates set to rise
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HUNDREDS of thousands of homeowners are facing higher mortgage costs this year amid mounting worries around the UK economy. Around 700,000 households are currently on fixed-rate deals due to end in 2025. An increase in government borrowing costs to a 27-year high this week sent the pound plunging and fuelled concerns that the economy is slowing.
![[Graph showing the number of fixed-rate mortgages expiring each month from January 2022 to December 2025, broken down by mortgage term.]](https://www.thesun.co.uk/wp-content/uploads/2025/01/DD-10-01-end-of-fixed-rate-mortgages-graph_COMP-1.jpg?strip=all&w=960)
This is expected to have a knock on effect on mortgage rates in a fresh blow to households. The government issues bonds, also known as gilts, when it needs to borrow money, with the interest on them called yields. But gilt yields have been rising with investors concerned inflation in the UK could stay higher for longer.
Investors are also concerned the UK economy will not perform and are betting against it, which is also pushing up yields. When gilt yields rise, so do swap rates, which are used by banks and lenders to set the rates offered on fixed-rate deals. Two year swap rates, which are based on what the markets think interest rates will be over the next 24 months, have increased sharply from 4% in mid-December to more than 4.5%.
Mortgage rates had been expected to fall this year but could now rise instead. Nicholas Mendes, from broker firm John Charcol, said: "The coming year could be another painful one for mortgage holders, as government borrowing continues to exert significant pressure on mortgage rates through its impact on gilts and swaps.".
