One million more UK homeowners to face higher mortgage bills

Created at 7 Jul · 11:35 AM1 source↑ Market-relevant

IN SHORT

The Bank of England forecasts that one million more UK homeowners will face increased mortgage bills by the end of 2028 than previously expected, driven by the impact of the Iran war on oil prices, inflation, and interest rates.

Key Numbers

1 millionadditional UK homeowners facing higher mortgage bills

5 millionhomeowners expected to face higher mortgage bills by end of 2028

4 millionhomeowners previously projected to face higher bills

£45typical monthly increase for owner-occupiers rolling off fixed rates

£120typical rise for those getting new deals between late 2022 and end of 2024

750,000homeowners paying less than 3% interest facing monthly increase

£170average monthly increase for homeowners on low-interest deals

2 yearstypical fixed-rate mortgage duration

5 yearstypical fixed-rate mortgage duration

2 millionborrowers on two-year fixed deals expected to see little change

Who's Involved

Bank of England

provided forecasts on mortgage payments and household finances

Kevin Peachey

Cost of living correspondent

Andy Burnham

Expected to take over from Sir Keir Starmer as Labour leader and prime minister

Sir Keir Starmer

Current Labour leader

↳ Why This Matters

This report signals a worsening outlook for UK homeowners, with a significant number facing increased monthly costs due to geopolitical events impacting inflation and interest rates, potentially straining household budgets.

Key facts

One million additional UK homeowners are projected to face higher mortgage bills by the end of 2028.
The Bank of England's revised forecast increases the number of affected homeowners from four million to just over five million.
The Iran war's impact on oil prices and inflation is identified as a key driver for higher interest rates.
A typical increase for those remortgaging in the next two years is estimated at £45 per month.
Homeowners currently paying below 3% interest could see monthly repayments rise by an average of £170.
Despite challenges, overall household finances are considered resilient, with low household debt relative to historical averages.

The Bank of England's latest Financial Stability Report indicates that one million more UK homeowners are expected to face higher mortgage bills by the end of 2028 than previously anticipated. This upward revision is attributed to the economic fallout from the Iran war, which has impacted oil prices, driven inflation, and consequently led to higher interest rates.

While the overall increase in monthly repayments for a typical owner-occupier rolling off a fixed rate in the next two years is projected to be around £45, a more significant rise of approximately £170 per month is anticipated for 750,000 homeowners currently benefiting from interest rates below 3%.

Despite these pressures, the report suggests that the UK's household finances remain resilient overall. Household debt is low relative to historical averages, and while lower-income households and renters are more vulnerable to higher energy prices due to spending a larger portion of their income on essentials, widespread debt-induced reductions in consumer spending are considered unlikely.

Separately, the Bank of England also highlighted increased risks of cyber attacks stemming from rapid advancements in artificial intelligence.

Frequently asked questions

The Iran war has impacted oil prices and inflation, leading to higher interest rates which are then passed on to homeowners by banks.

A typical owner-occupier rolling off a fixed rate in the next two years may see a £45 monthly increase, while those on deals below 3% interest could see an average rise of £170 per month.

Yes, the Bank of England report suggests overall household finances remain resilient, with household debt low relative to historical averages.

Lower-income households, including renters, are more exposed as they spend a larger share of their income on essentials.

What Happens Next

01The Bank of England will continue to monitor household finances and mortgage market stability.

02Government action will be required to address the projected tripling of UK debt to nearly 300% of GDP over 50 years.

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How It Developed

The Bank of England now expects one million more homeowners to face higher mortgage bills by the end of 2028.

This projection is an increase from the four million previously forecast in December.

The impact is not expected to be as severe as seen in recent years.

A typical owner-occupier rolling off a fixed rate in the next two years may see a £45 monthly increase.

Borrowers on deals with less than 3% interest this year could see an average £170 monthly increase.

The Iran war's impact on oil prices and inflation is cited as a reason for higher-than-expected interest rates.

Higher interest rates are being passed on to homeowners, increasing mortgage rates.

Household finances are considered resilient overall, with household debt remaining low relative to historical averages.

Sources

One million more UK homeowners set to face higher mortgagesBBC News