More than 5 million homeowners are expected to see their monthly mortgage repayments rise by the end of 2028, according to new Bank of England forecasts.
That is 1m more than the Bank predicted in December, with the change linked to the economic impact of the Iran war and higher energy prices.
The Bank’s latest Financial Stability Report said the increase should be less severe than the payment shocks seen in recent years. A typical owner-occupier coming off a fixed-rate deal in the next two years is expected to pay around £45 more a month. By comparison, those refinancing between late 2022 and the end of 2024 faced an average rise of £120 a month.
However, some households face a much sharper increase. Around 750,000 homeowners currently paying less than 3% interest are due to come off those deals this year. The Bank expects their repayments to rise by an average of £170 a month.
More than 8 in 10 mortgage customers are on fixed-rate deals, usually lasting two or five years. Their payments stay the same until the deal ends and they choose a new one.
Before the Iran conflict, more than 2m borrowers with two-year fixed deals expiring by the end of 2028 had been expected to remortgage at similar rates, with some seeing repayments fall. The Bank now says falling repayments are less likely.
The war pushed up oil and gas prices after the Strait of Hormuz was closed, increasing inflation fears and raising expectations of higher interest rates. Lenders have passed those higher costs on through mortgage rates.