Key facts
- UK Finance data show 2.3 million households reach the end of fixed-rate deals in 2027.
- The Bank of England's nine-member committee was widely expected to raise the base rate to 4% from 3.75% on November 5.
- Financial market expectations pointed to four quarter-point rises over 12 months, the report said.
- Many City economists suggested two rate rises were more likely than the four priced by money markets.
- EDF forecast Ofgem's energy price cap would rise by more than £400 in January.
- The OBR said the energy price shock would push consumer inflation to 3.5% this year, against a 2% March forecast.
More than 2.3 million UK households will reach the end of fixed-rate mortgage deals in 2027, according to data collected by UK Finance, a banking industry body, and face higher payments when they move to new rates. A further 700,000 borrowers had been forecast to come off fixed contracts between July and December, the report said.
The Bank of England's nine-member monetary policy committee was widely expected to raise the base rate to 4% from 3.75% on November 5, after UK inflation rose to 3.5% in September. Financial market expectations pointed to four quarter-point rises over 12 months, the report said, while many City economists suggested two were more likely. The base rate has not changed since December last year.
Volatility in bond markets, which the report linked in part to energy prices and inflation fears tied to the war in the Middle East, has driven up the swap rates that affect fixed-rate mortgage pricing. Mortgage approvals fell to a near three-year low in September, data released the previous week showed.
Alongside the budget, the Office for Budget Responsibility warned that household disposable incomes would fall 0.6% next year after inflation, against a March forecast of a 0.6% increase. The OBR's David Miles described the outlook as "a pretty grim picture". The watchdog said the energy price shock would push consumer inflation to 3.5% this year, against a 2% March forecast.
Ofgem's energy price cap is expected to rise by more than £400 in January, according to the latest forecast from EDF. Chancellor John Healey made a £100 payout to 20 million households the centrepiece of his budget, saying he wanted to "take the pressure off in the coldest months and see people through to the spring". The package also canceled fuel duty rises planned by Rachel Reeves and extended a VAT cut on electricity bills, paid for by tax rises on banks, savers and landlords.
Andrew Bailey, the governor of the Bank of England, has made clear the committee is watching whether rising prices are passed into higher wages, the so-called second-round effects that can embed inflation. Before the war in the Middle East the Bank had been expected to cut rates several times this year, but high oil prices, affected by the closure of the Strait of Hormuz choking off supplies, fed through into higher inflation. The Bank will publish updated growth and inflation forecasts alongside its decision.