2026 Mortgage Shock: How Home owners Can Prepare for the End of Ultra-Low Covid Deals

The 2026 Wake-Up Call

2026 will be a very important year for UK homeowners.
A huge number of five-year fixed mortgages taken during Covid will come to an end.
Many of those deals were secured at around 1% interest.

Fast forward to today, and new rates are closer to 4%.
That’s not a small increase.
That’s a 3% jump.

On a £300,000 mortgage, that difference works out to roughly:

• £9,000 extra per year
• About £750 extra every month

For many households whose income hasn’t risen much in five years, and who are already
dealing with a higher cost of living, this will feel like a serious financial shock.

The good news?
This is manageable if you start planning early.

Step One: Stress-Test Your Own Budget Now

If your future payment is likely to increase by around £750 per month, don’t wait until 2026
to find out if you can afford it.
Start now.

A practical approach:
Try putting aside £150 per month into savings as a trial.
This helps you:

• Test your cash flow
• Adjust your lifestyle gradually
• Build a safety buffer

If you can handle £150 today, you can slowly increase it later as you prepare for the full
change.

Step Two: Review Your Spending

This is also a good moment to look closely at your expenses.
Focus on the “nice-to-have” items:

• Entertainment subscriptions
• Eating out and takeaways
• Extra holidays
• Non-essential purchases

Even trimming a few hundred pounds per month can make your future mortgage far more
comfortable.

Step Three: Start Speaking to a Mortgage Adviser Early

Do not wait until your deal expires.
The earlier you plan, the more options you’ll have.
If your future payments feel unmanageable, a mortgage adviser can explore alternatives that
help cushion the impact.

Here are some of the real solutions we are already using with clients.

Mortgage Options That Can Help Reduce the Pressure

1. Extending the Mortgage Term

Example from a real case:
A client had 25 years remaining and was only 35 years old.
We extended the term to 30 years, which significantly reduced the monthly payment.

Is this ideal?
No, because you pay more interest overall.
But when cash flow is under pressure, sometimes it’s the most realistic solution.

2. Interest-Only or Part Interest / Part Repayment

For clients with strong equity but tight monthly budgets, we sometimes consider:

• Full interest-only, or
• Part interest, part repayment

This reduces monthly commitments while keeping the mortgage sustainable.

3. Using Spare Savings Strategically

Some clients had cash saved for emergencies.
By using part of that money to reduce the mortgage balance, their new monthly payments
became far more manageable.
Less loan = less interest = lower payment.

4. Offset Mortgages

For clients with significant savings, an offset mortgage can be very powerful.
Your savings are offset against the mortgage balance, meaning:

• You pay less interest
• Your monthly payment reduces
• You still keep access to your savings

Every Household Is Different

There is no one-size-fits-all solution.
What works for one homeowner may not suit another.
That’s why early planning and personal advice are so important.

Final Thought

2026 will be uncomfortable for many borrowers, but it does not have to be a crisis.
With:

• early preparation
• smart budgeting
• professional advice
• and the right mortgage structure

most households can absorb this change safely and confidently.

FAQs

Why is 2026 such an important year for mortgage borrowers?

Because many five-year fixed mortgages taken during Covid at around 1% are expiring, and
new rates are much higher.

How much could my payments increase?

On a £300,000 mortgage, a 3% rise could mean about £750 more per month.

When should I start planning?

Ideally 12–18 months before your current deal ends.

Is extending my mortgage term a good idea?

It increases total interest but can significantly reduce monthly payments and protect cash
flow.

Can I avoid this shock completely?

Not entirely, but early planning and the right structure can reduce the impact dramatically.

Important FCA Warning

As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.