Millions of UK households could see mortgage repayments go up, Bank of England says

Alex Daniel PA Business Reporter & Graeme Whitfield
·2-min read
The Bank of England in London's financial district
-Credit: (Image: Leon Neal/Getty Images)


The Bank of England has stated that approximately 4.4 million UK households could experience increases in their mortgage repayments over the next three years.

The Bank's Financial Policy Committee (FPC) revealed that this will include £500-per-month hikes for the mortgages of around 420,000 households. Additionally, between one million and 1.5 million people are predicted to see a second increase in rates, having already fixed to a higher price since interest rates began to rise in the second half of 2021.

About 31% of all mortgages, or 2.7 million people, are expected to refinance onto a rate of more than 3% for the first time before the final quarter of 2027.

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However, the central bank emphasised that UK lenders remain in a strong position to support households and businesses, even if the economic backdrop deteriorates. The Bank's latest Financial Stability Report showed that most households have already experienced an increase in their mortgage rates since borrowing costs started rising significantly.

After sharp rises in 2022 and 2023, interest rates began to fall from a 16-year-high of 5.25% earlier this year, with the central bank voting twice to cut the base rate in recent months, bringing it down to 4.75%. Approximately 37% of households with mortgages have not yet fixed to a new rate since interest rates began to rise in the second half of 2021.

A typical household rolling off a fixed-rate mortgage in the next two years is due to face a jump of around £146-a-month, the report said – down on the last projection of £180 in June. Approximately 27% of mortgage holders, equating to around 2.4 million individuals, are expected to experience a decrease in monthly payments by the end of 2027, despite having faced rising rates until now.

The Bank highlighted increased threats to the financial system stemming from wars, trade tensions, and cyber-attacks, noting that escalating geopolitical frictions represent a "significant" danger to banking operations and overall financial stability. In the document, officials commented: "Following elections in many countries, a range of macroeconomic and financial policies may change under newly-elected governments."

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