- Over 5 million households in the UK are projected to see their mortgage repayments increase by the end of 2028, according to the latest Bank of England (BoE) Financial Stability Report.
- The typical increase in mortgage repayments for households rolling off fixed rates in the next two years is projected to be just £45 per month, or £540 annually.
- One million additional homeowners are now expected to face higher mortgage payments than previously anticipated, largely due to the ongoing impact of the Iran conflict.
- Households paying less than 3% interest on their current mortgage deals will see an average increase of £170 per month when they roll off these products in 2026.
- Mortgage repayments have been rising due to elevated interest rates, with the median monthly repayment increasing by approximately £120 between the end of 2022 and the end of 2024.
- Household debt remains low relative to historical averages, but the financial strain from increased mortgage payments is expected to impact disposable income significantly.
The Bank of England's latest Financial Stability Report indicates that over 5 million UK households will see their mortgage repayments rise by the end of 2028, a significant increase from the 4 million projected in December. The typical increase is expected to be £45 per month, or £540 annually, for those rolling off fixed rates in the next two years.348
The report highlights that 750,000 households currently paying less than 3% interest will face an average increase of £170 per month when their fixed rates expire in 2026. This shift is attributed to the ongoing elevated interest rates, which are expected to remain the norm rather than a temporary spike.
Despite the projected increases, the Bank of England notes that the impact will be less severe than in previous years, with the median monthly repayment rising by approximately £120 between the end of 2022 and 2024. The debt servicing ratio (DSR) is expected to increase slightly from 7.5% to just above 8% by 2028 if energy prices remain high.
The report warns that the financial strain on homeowners could lead to reduced discretionary spending, affecting sectors like retail and hospitality. As homeowners grapple with these changes, the ripple effects may exacerbate the ongoing crisis in the private rental market.
Overall, the Bank's findings underscore the challenges facing UK households as they navigate a landscape of rising mortgage costs and economic uncertainty.
“Nearly 750,000 homeowners with sub-3% rates rolling off this year face a far steeper £170 monthly increase. The Bank also said lower-income renters are more vulnerable to higher energy costs, and the debt servicing ratio is expected to rise above 8% by 2028.”
