Remortgage rate shock: the equity curve on a £200k loan (UK 2026)
When a five-year fixed-rate mortgage rolls off, the borrower is dropped back into whatever the market is quoting that month. The Bank of England's monthly file shows how live that risk is: the quoted 75% loan-to-value five-year fix sat at 4.62% in May 2025, drifted down to 4.32% by April 2026 (Bank of England Bankstats Table A5.7), and the effective rate paid across outstanding mortgages — the BoE IUMBV34 series — moved from 3.92% in January 2026 to 5.14% in April 2026, a 1.22 percentage-point swing in three months on the same dataset.
Asking what a remortgage at +1pp, +2pp or +3pp would actually do is, on these numbers, not academic.
This piece does the amortisation maths on a single canonical case: a £200,000 mortgage opened today at the current 4.32% five-year fix, over a 25-year term, with the borrower remortgaging at the end of year five onto a new 20-year deal at five different reset rates. Headline finding: a +3pp shock raises the monthly payment by £301 (+28%) but only slows the equity-build curve at year 10 by about £10,200 (–18%). The pain is overwhelmingly a cashflow story, not an equity-destruction story.
The baseline: £200k at 4.32% over 25 years
At the current quoted 75% LTV five-year fix of 4.32% (Bank of England, April 2026), a repayment mortgage of £200,000 over 25 years costs £1,091.33 per month.
After 60 monthly payments — the standard five-year fixed period — the loan looks like this:
| Item | Value |
|---|---|
| Monthly payment, years 1–5 | £1,091.33 |
| Interest paid, years 1–5 | £40,660 |
| Principal paid (equity built from amortisation) | £24,819 |
| Outstanding balance at end of year 5 | £175,181 |
That £24,819 is the entire equity-from-amortisation cushion the borrower walks into the remortgage with. It excludes the deposit and any change in the home's market value, because forward-looking price assumptions are outside what the empirical record will support.
The question is what happens to that cushion when the reset rate moves.
Five scenarios at the year-5 remortgage
We hold the deal length constant (a fresh 20-year repayment schedule on the £175,181 outstanding balance) and vary the rate by –1pp, flat, +1pp, +2pp and +3pp around the current 4.32%. The Bank of England's published series of monthly quoted five-year fixes for owner-occupiers (Bankstats Table A5.7) is the canonical source for the live distribution; this piece is not forecasting where it goes next, only mechanically pricing each reset point.
| Reset shift | New rate | New monthly payment | Δ vs initial £1,091 |
|---|---|---|---|
| −1pp | 3.32% | £999.85 | −£91 (−8.4%) |
| Flat | 4.32% | £1,091.33 | £0 |
| +1pp | 5.32% | £1,187.31 | +£96 (+8.8%) |
| +2pp | 6.32% | £1,287.60 | +£196 (+18.0%) |
| +3pp | 7.32% | £1,392.02 | +£301 (+27.6%) |
The cashflow asymmetry is the first thing worth noticing. A –1pp reset saves £91 a month. A symmetric +1pp reset costs £96 a month. Past flat, the steps stretch out: every additional percentage point on top of the new rate adds roughly £100 to the monthly bill on this loan size.
The equity curve reshapes — but less than the monthly bill does
Equity built (principal paid down, measured from the original £200,000) at five-year milestones across the loan life:
| Reset shift | Yr 5 equity | Yr 10 equity | Yr 15 equity | Yr 20 equity |
|---|---|---|---|---|
| −1pp | £24,819 | £58,394 | £98,021 | £144,794 |
| Flat | £24,819 | £55,611 | £93,811 | £141,204 |
| +1pp | £24,819 | £52,977 | £89,693 | £137,570 |
| +2pp | £24,819 | £50,495 | £85,683 | £133,908 |
| +3pp | £24,819 | £48,167 | £81,796 | £130,233 |
By year 10 — five years after the remortgage — a +3pp shock has slowed the equity-from-amortisation curve by £7,444 relative to the flat reset (£48,167 vs £55,611), or about £10,200 below the –1pp benign-reset case. Compared to the £18,000 of extra interest a +3pp reset extracts over those same five years, the equity drag is modest.
The mechanism is straightforward. Higher rates mean a larger share of each monthly payment goes to interest rather than principal — but the lender also collects a bigger monthly payment, which buys back some of that lost principal velocity. The amortisation curve flattens, but it doesn't collapse.
A useful way to feel this is to look at where the very first post-remortgage payment goes:
| Reset shift | Monthly | First-month interest portion | First-month principal portion |
|---|---|---|---|
| −1pp | £999.85 | £485 (48%) | £515 |
| Flat | £1,091.33 | £631 (58%) | £461 |
| +1pp | £1,187.31 | £777 (65%) | £411 |
| +2pp | £1,287.60 | £923 (72%) | £365 |
| +3pp | £1,392.02 | £1,069 (77%) | £323 |
At +3pp, 77p of every £1 going to the lender in the first month after remortgage is pure interest. The principal-paydown component drops from £515 (the –1pp case) to £323 — a £192/month difference in equity-build speed — but the borrower is also writing a cheque that is £392 larger every month. The "extra" cheque is overwhelmingly funding additional interest, not additional equity.
Lifetime interest: the bigger story
The cumulative cost of the loan tells a different story to the equity curve. Total interest over the full 25-year life (60 months at 4.32% plus 240 months at the new rate):
| Reset shift | New rate | Lifetime interest | Total paid (P + I) |
|---|---|---|---|
| −1pp | 3.32% | £105,443 | £305,443 |
| Flat | 4.32% | £127,399 | £327,399 |
| +1pp | 5.32% | £150,433 | £350,433 |
| +2pp | 6.32% | £174,504 | £374,504 |
| +3pp | 7.32% | £199,566 | £399,566 |
The lifetime-interest spread from the –1pp reset to the +3pp reset is £94,123 on a £200,000 loan. That is roughly half the principal again, paid in interest, attributable entirely to the rate movement at the single remortgage point.
This is the line item that does most of the actual damage in a rate-shock scenario. The equity curve barely buckles; the cashflow stretches; but the lifetime interest figure compounds quietly across 240 months and lands as a six-figure delta by the end.
How does this compare to recent market moves?
For context on whether ±3pp is a thought experiment or a real distribution:
| Series | Recent print | Source |
|---|---|---|
| 75% LTV 5-year fixed, quoted rate (April 2026) | 4.32% | Bank of England Bankstats A5.7 |
| Same series, May 2025 | 4.62% | Bank of England Bankstats A5.7 |
| Effective rate on outstanding mortgages (April 2026, IUMBV34) | 5.14% | Bank of England database |
| Same effective series, January 2026 | 3.92% | Bank of England database |
The twelve-month range in the database snapshot to hand is narrow — a 30bps band on the quoted five-year fix. The effective rate on outstandings shows wider three-month moves (+122bps Jan→Apr 2026). The Bank's longer published history of the same series (visible in the BoE database) makes clear that swings of more than 2 percentage points across a five-year window have happened multiple times in the post-2008 period. Whether the next one is up or down is not for this piece to say.
What this piece can say is what the maths does at each point on the distribution, so readers can locate their own situation on the curve rather than imagine it.
Where this leaves the £200k borrower
Three patterns that fall out of the table above without needing any forecast:
- The cashflow tail is steep and the equity tail is shallow. A +3pp rate shock raises monthly payments by 28% on this loan, but slows equity-from-amortisation at year 10 by only 18%. Stress-test the household budget, not the equity number.
- Lifetime interest is where the damage compounds. Each +1pp on the reset rate adds roughly £23,000–25,000 to the 25-year interest total on a £200k loan, even though the monthly delta is only ~£100. The 240-month tail does most of the work.
- The equity cushion at year 5 is locked in. The £24,819 of principal already paid down by the end of the initial fix is identical in every scenario — the reset only changes what happens after that point. So the most useful number for understanding remortgage risk is the year-5 outstanding balance, not the rate quoted on day one.
For a different lens on the same maths — what the equity curve looks like against rent paid into a landlord's pocket over the same period — see Equity built vs rent paid: what £1 of housing actually buys you (UK 2026). For the question of how the underlying monthly figure changes if the borrower stretches the term out at remortgage rather than accepting the rate move, see 25 vs 35-Year Mortgage: What Extending the Term Costs You in 2026. The headline-monthly piece for this loan size is Monthly cost of a £200,000 mortgage in the UK (2026), which works from the same 4.32% quoted-rate anchor. Readers comparing rate-shock outcomes against the full buy-vs-rent breakeven model can dig into Rate stress test: buy-vs-rent breakeven if remortgage rates change (UK 2026).
To run the same maths against your own purchase price, deposit and term, plug a postcode into the Homecost calculator at /?postcode=B1+1AA — Birmingham city centre, where a £200k purchase still maps to a representative mid-market flat — or browse other cost-intelligence guides at /blog?category=cost-intelligence.
Based on 12 months of Bank of England Bankstats Table A5.7 75% LTV 5-year fixed quoted rates plus 28 months of the IUMBV34 outstanding-mortgage effective rate series as of the database snapshot dated April 2026. See /blog for source notes on each Homecost data series.
This is general information about how UK repayment mortgage amortisation works, not a recommendation for any specific product, lender or course of action. Mortgage rates, eligibility and product features depend on individual circumstances, credit profile, deposit and lender. Speak to an FCA-authorised mortgage broker or financial adviser before acting.