With more than half of homeowners (55%) coming to the end of their fixed-term deal within the next three years, 89% are worried about rising interest rates and their mortgage payments increasing, new research by Comparethemarket shows. 

Almost nine in ten of these are concerned this will impact their ability to pay everyday household bills.

In September, the Bank of England (BoE) raised its base rate by 50 basis points to 2.25%, the highest level since 2008. 

The move aimed to help counter rising inflation, which the BoE now predicts will hit 13% before year end.

While 71% say they will choose to remortgage when they come to the end of their fixed-term deal, the 15% who are planning not to, could face a big repayment shock, as they will likely be moved onto the lender’s higher standard variable rate (SVR). 

However, a quarter of those surveyed are not on a fixed-rate mortgage deal, with 16% on an SVR, meaning these borrowers risk paying a higher interest rate.

The survey also reveals that 55% of homeowners say the certainty of repayments for a fixed amount of time is the main benefit of a fixed-rate mortgage, while 48% suggest it’s the protection against future interest rate rises. 

But as fixed-term mortgage rates continue to increase, homeowners are now faced with a difficult choice, as deals have recently risen to a higher rate than the average SVR.

As of 7 October, the average SVR rate for the big five lenders was 5.44% while the average two-year fixed rate reached over 6%.

Comparethemarket director Alex Hasty says: “We understand it is an uncertain and difficult time for many homeowners, as SVR and fixed-term rates rise, the number of mortgage products fluctuates, and the cost-of-living crisis deepens. Those soon coming to the end of their fixed rate deal are likely to face a big repayment shock, even if they’re remortgaging.”

“For these homeowners, it is best practice to remortgage rather than switch to your lender’s higher SVR. It’s important to compare mortgage products online – checking the available deals now and staying aware of what is happening in the market will help you to prepare your budget and save for the future.”