The Bank of England has warned that as many as 750,000 households are set to lose £170 a month as mortgage bills climb again. The warning comes from the Bank's latest Financial Stability Report, which also projects that more than five million homeowners in total face higher mortgage bills between now and 2028, with the average increase expected to be £45 a month.
Pressure from Fixed-Rate Mortgage Expiries
According to the Bank of England, the increases are driven by homeowners coming off fixed-rate mortgage deals and being forced to re-fix at higher rates. The report states that almost 750,000 households currently paying less than 3% interest will fall off their fixed-rate mortgages in 2026 and face an average increase of £170 a month in their repayments.
In a previous report last December, the Bank had said 3.9 million, or around 43% of mortgage owners, were set for increases when they next renew. The new report updates this figure, noting that "a little over five million households" are projected to see increases by the end of 2028.
Current Mortgage Rates and Comparisons
The report shows that the average rate for a two-year fixed mortgage with a 75% loan-to-value is 4.92%. This is 0.72 percentage points higher than it was at the time of the Bank's previous financial stability report in December. The Bank said higher borrowing costs and energy prices "could place additional pressure on household finances" but stressed that this will still leave household debt levels below previous peaks.
The Bank emphasised that UK households and corporate debt levels are still low compared to historical averages and are resilient to potential shocks.
Impact on Household Finances
Joe Smithies, Head of Advice at PennyPlan, a leading debt solutions provider, commented on the situation: "Mortgage rate increases have had a huge financial impact on many homeowners in recent years and combined with a 26% increase in council tax for many, it is hitting the purse strings hard."
Smithies added: "We've seen a significant increase in people coming to us with unaffordable debt over the last few years, with the rise in mortgage, and rent, costs playing a prominent role in making other areas of living unmanageable. As mortgage repayments rise we anticipate a significant spike. If you are one of the five million that could expect mortgage repayments to go up by the end of 2028, now would be a good time to try and reduce the cost of existing unsecured debts, consolidate multiple monthly repayments where appropriate and ensure your mortgage and wider borrowing remain suitable for your circumstances."
Broader Economic Context
The Bank of England's warning comes amid ongoing pressures from the Iran conflict and rising energy prices, which are contributing to higher inflation and borrowing costs. The report highlights that while household finances are under strain, the overall debt levels remain manageable compared to historical peaks. However, for those on lower incomes or with high existing debts, the increases could prove challenging.
