Mortgage Repayments Set to Rise for Three Million Households, Warns Bank of England

As the cost of living crisis continues to bite, the Bank of England has issued a stark warning to homeowners: mortgage repayments are set to rise for three million households over the next two years. This increase is a direct result of high interest rates, which have been hiked to a near two-decade high of 5.25% in an effort to curb price rises.

Interest rates have been hiked to a near two-decade high

The Bank’s financial policy committee has warned that as many as 400,000 homes will experience “very large increases” of more than 50% in their mortgage repayments. This is because many homeowners are still paying a mortgage rate of less than 3%, having signed up for a deal before the energy price shocks that resulted from the war in Ukraine. Once these deals come to an end, households will have to sign up to a more expensive product.

“I remember when I first got my mortgage, the interest rate was a mere 2%. I thought I was set for life. But now, with rates rising, I’m not so sure. It’s a worrying time for homeowners like me.” - Sarah, a homeowner from London

Most mortgage holders, however, have repriced since mortgage rates started the cycle of increases late in 2021. A typical household rolling off a fixed-rate mortgage before the end of 2026 is due to face a jump of around £180 a month, the report said.

Mortgage rates have been rising steadily since 2021

The good news is that interest rates are expected to come down in the coming months, with a cut forecast for August, September, November, and December. However, consumers have been warned not to expect a return to the era of ultra-low interest rates.

“The new normal is mortgage rates of 3.5% to 4.5%. Homeowners need to be prepared for this new reality.” - Charlie Nunn, CEO of the UK’s largest lender

Mortgage rates are expected to stabilize in the coming months

As the mortgage landscape continues to shift, one thing is clear: homeowners need to be prepared for rising repayments. Whether you’re a first-time buyer or a seasoned homeowner, it’s essential to factor in these increases when planning your finances.

What do you think about the rising mortgage repayments? Share your thoughts in the comments below.