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Nearly half of UK mortgage holders are set to see their payments rise over the next three years, according to the Bank of England (BoE). The central bank estimates that around 4.4 million mortgages will experience higher payments by 2027, with 420,000 households facing hikes of £500 per month.
In addition, between 1 million and 1.5 million people are expected to see a second rate increase, having already fixed their mortgages at higher prices since interest rates began to rise in the second half of 2021. About 31% of all mortgage holders, or approximately 2.7 million people, are predicted to refinance at rates higher than 3% for the first time before the final quarter of 2027.
The Bank of England's Financial Stability Report also noted that 37% of households with mortgages have not yet fixed their rates since the interest rate increases began in 2021. As a result, a typical household coming off a fixed-rate mortgage within the next two years could see an increase of approximately £146 per month in their payments.
However, there is some relief for others, as about 27% of mortgage holders, or 2.4 million people, are expected to see their monthly payments decrease by the end of 2027, after already experiencing rate hikes.
Tom Cuppello, director of risk at Broadstone, said: “The economy remains in a fragile condition with confidence dented following a bruising budget, but any evidence of further recovery will help support green shoots of optimism.
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Cuppello further noted the ongoing issue of fixed-rate mortgage accounts: “For example, the Bank of England notes that over a third, or 37%, of fixed-rate mortgage accounts are still yet to fall off those favourable rates since drastic increases in the cost of borrowing started in the second half of 2021.
"However, falling rates could help many of those who have transferred onto more expensive mortgages lower their monthly repayment costs and free up more income.”
The BoE also issued a warning about the rising global risks to the economy. It cited wars, trade tensions, cyber-attacks, and geopolitical instability as significant threats to broader financial stability.
Despite these concerns, the BoE suggested that household finances in the UK had remained resilient overall.
Read more: UK house prices rise at fastest pace in two years
“While many UK households, including renters, are still facing pressures from the increased cost of living and higher interest rates, the share of households who are behind in paying their mortgages is low by historical standards,” the report stated.