Mortgage Repayment Burden Looms for Millions of UK Households

The Bank of England has issued a stark warning to UK households, predicting that around 3 million households will face significant increases in mortgage repayments over the next two years. According to the Bank’s latest Financial Stability Report, a staggering 400,000 households will experience “very large increases” of over 50% in their mortgage payments.

Mortgage repayment burden

Currently, around 35% of households with mortgages pay interest rates below 3%, but these rates are set to rise significantly by the end of 2026. The Bank of England suggests that a typical household rolling off a fixed-rate mortgage in the next 30 months will face a jump of around £180 a month.

The report highlights that most households have already experienced an increase in their mortgage rates since borrowing costs began rising substantially in 2022. Interest rates are currently at a 16-year-high of 5.25%, with no cut possible until at least August and possibly beyond.

“The overall risk environment for the economy and financial sector is unchanged, with the banking sector having the capacity to support households and businesses even if economic and financial conditions were to be substantially worse than expected.”

The Bank is particularly concerned about the burden on renters, with the proportion of those behind on rent increasing to 16.5% in the first quarter of 2024, compared to 15.7% a year ago.

Rent burden on the rise

Despite the challenges ahead, the Bank of England remains confident in the banking sector’s ability to support households and businesses, even in the face of economic and financial uncertainty.

Bank of England remains confident

The report serves as a stark reminder to UK households to prepare for the impending mortgage repayment burden and to take steps to minimize their debt.

Mortgage repayment planning