One Million Mortgage Payers Face Increased Monthly Payments Of £500

12th July 2023

Mortgage payments will rise by at least £500 a month for nearly one million households by the end of 2026, the Bank of England has said today.

Households and firms have been under pressure as interest rates have risen in a bid to lower high inflation.

In a report, the Bank said mortgage holders "may struggle with repayments" on loans. But it said lenders are strong enough to withstand a rise in customers defaulting on repayments.

The Bank has raised interest rates from 0.1% in December 2021 to 5% to curb rising prices.

Expectations that borrowing costs might rise even further has pushed up mortgage rates. On Wednesday 12 July 2023, the average rate on a two-year fixed mortgage hit a fresh 15 year high of 6.7%, according to Moneyfacts, the financial information service.

The Bank of England said in its twice-yearly Financial Stability Report that as fixed-rate mortgage deals expire and people renew their loans, mortgage repayments will go up.

More than two million households will pay between £200 and £499 more per month over the next three and a half years, it warned.

A further one million mortgage holders will see their monthly payments rise by at least £500.

In the shorter term, the average household coming off a fixed rate deal in the second half of 2023 will have to pay about £220 more a month if they refinanced at current rates.

Most mortgages taken out in recent years have been at a fixed rate of two or five years which means there is a lag in terms of when recent rate rises will hit households.

About 4.5 million homes have had to pay more in mortgage repayments since late 2021, and higher rates will hit the vast majority of the rest by the end of 2026.

The mortgage pain may not be over as some experts predict further interest rate rises to come. The Bank of England next rate announcement is on 3 August 2023.