The Bank of England has warned that half of the UK’s mortgage holders could find their payments increase over the next three years. The Bank predicted that around 4.4 million mortgages would experience such rises by 2027, including 420,000 households expecting payments to rise by £500 per month. Around 25% of borrowers will pay less. The Bank, however, believes households are now better placed than at the start of the year to meet repayments.
The BoE has also noted that global risks to the economy are increasing, particularly due to trade tensions, wars, cyber attacks and geopolitical tensions. Such factors represent “significant” threats to financial stability.
In the latest Financial Stability Report, the Bank revealed that household finances have, in general, remained resilient. Although many households still struggle to deal with rising living costs, together with higher interest rates, few households have fallen behind on mortgage payments. The Bank stressed that while 50% of mortgage holders may see higher payments over the next seven years, 23% will experience no change and 27% will experience a reduction.
The Bank has predicted that by the end of 2027 around 2.7 million homeowners will have switched to a mortgage rate higher than 3%, a fifth of which will experience a rise before the end of next year. In addition, the Bank expects that the mortgage rate on a property coming off a fixed rate in the next two years will lead to an increased monthly repayment of £146, down from its previous estimate, due to the trend towards borrowing over longer terms and a decrease in mortgage rates
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