About 4.4 million UK households could see hikes to their mortgage repayments over the next three years, the Bank of England said.
The Bank’s Financial Policy Committee (FPC) said this will include £500-per-month hikes for the mortgages of around 420,000 households.
Meanwhile, between one million and 1.5 million people are set to see a second increase in rates, having already fixed to a higher price since interest rates started rising in the second half of 2021.
About 31% of all mortgages, or 2.7 million people, are expected to refinance onto a rate of more than 3% for the first time before the final quarter of 2027.
But the central bank stressed that UK lenders are still in a strong position to support households and businesses, even if the economic backdrop worsens.
The Bank’s latest Financial Stability Report showed that most households have already had an increase in their mortgage rates since borrowing costs began rising substantially.
After sharp rises in 2022 and 2023, interest rates started to fall from a 16-year-high of 5.25% earlier this year, with the central bank voting twice to cut the base rate in recent months, bringing it down to 4.75%.
Our Financial Stability Report looks at the risks in our financial system and what we are doing to ensure households and businesses can rely on it. https://t.co/QRl3hKDXgJ #FinancialStabilityReport pic.twitter.com/AZVJePVoZ6
— Bank of England (@bankofengland) November 29, 2024
About 37% of households with mortgages have not yet fixed to a new rate since interest rates started rising in the second half of 2021.
A typical household rolling off a fixed-rate mortgage in the next two years is due to face a jump of around £146-a-month, the report said – down on the last projection of £180 in June.
About 27% of mortgage holders, or 2.4 million people, are expected to see monthly payments decrease before the end of 2027, having already seen rates rise.
The central bank also said the overall risk environment for the economy and the financial sector has risen in the last six months after a swathe of new governments were elected across the globe.
The Bank said risks to the financial system from wars, trade tension and cyber attacks were on the rise, adding that growing geopolitical tensions pose a “significant” risk to banks and broader financial stability.
Officials wrote: “Following elections in many countries, a range of macroeconomic and financial policies may change under newly-elected governments.”
In a survey of finance firms like banks and asset managers, “the proportion of those citing geopolitical risks reached its highest level” recorded by the poll.
This comes amid an escalation of Russia’s war in Ukraine in recent weeks, the ongoing war in the Middle East and the potential worsening of US-China relations.
US President-elect Donald Trump also recently vowed to slap higher-than-expected import tariffs on goods from Canada, Mexico and China, heightening fears of trade wars globally.
The Bank’s report on Friday did not mention Mr Trump, but pointed to the “potential to increased global fragmentation” of trade as part of the broader range of geopolitical issues.
It said trade fragmentation also “poses risks to UK financial stability”, while it could also “make it harder to achieve an orderly transition to net-zero greenhouse gas emissions”.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereLast Updated:
Report this comment Cancel