More than 3.6 million UK households are expected to face higher monthly mortgage payments over the next three years, according to the latest Financial Stability Report from the Bank of England.
The central bank said that around 40% of mortgage holders will experience increased costs as their fixed-rate mortgage deals expire between now and mid-2028. This is largely due to the sustained rise in interest rates since 2021, which many borrowers have so far avoided by locking into low fixed-rate deals.
According to the report, approximately 30% of homeowners have yet to refinance their mortgages since the start of the current interest rate tightening cycle. While this figure has improved from 50% in November, the Bank warned that a significant portion of households remain vulnerable to payment shocks in the coming years.
“As existing fixed-rate mortgage deals come to an end, many households will move onto higher interest rates, resulting in increased monthly repayments,” the report stated. The rise in borrowing costs is expected to weigh on household spending power and may contribute to wider economic pressures.
However, the report also offered a silver lining. Around 2.5 million households, or 28% of mortgage holders, could see their repayments fall by June 2028. This includes roughly 1.5 million homeowners currently on variable-rate mortgages who stand to benefit if the Bank of England cuts interest rates in the near future.
Market expectations suggest that the Bank’s base rate may begin to decline later this year, provided that inflation continues on its downward path. While this could offer relief to many, analysts caution that any rate cuts are likely to be gradual and may not come in time to offset the higher costs some borrowers will face in the interim.
The report also noted that UK households are generally in a stronger financial position than during previous economic downturns. Strong employment levels, lower debt-to-income ratios, and rising wages are helping to cushion the blow of rising mortgage rates for many.
Nonetheless, the Bank stressed that lenders must continue to monitor borrower affordability and ensure responsible lending practices amid ongoing economic uncertainty.
With millions of mortgage holders yet to feel the full impact of higher interest rates, the coming years are expected to test household resilience across the country.
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