6th November 2026
Workers rather than mortgagors have the most to fear from the Bank’s announcements today (Thursday), with higher inflation forecast in its latest economic outlook dealing a £670 blow to the average private-sector salary next year, says the Foundation.
With markets having already priced in today’s decision to raise interest rates, the 90 per cent of mortgagors who are on fixed rather than variable rate mortgages are unlikely to be affected by today’s news.
Instead, it has been events over the past eight months – notably conflict in the Middle East – that have affected mortgagors. Average 2-year fixed rates have risen by 1.2 percentage points since February, a rise that would cost a typical recent first-time buyer (with a £220,000 mortgage) an extra £140 in monthly repayments.
The pain for mortgagors continues into next year. The Foundation’s analysis shows that the UK’s aggregate mortgage interest bill in 2027 is now projected to be £78 billion, £9 billion more than a projection from February (£69 billion).
The most worrying news to come out of the Bank today was its latest forecast for inflation, which is now set to peak at 4.9 per cent in Q2 2027. As a result, real private-sector earnings growth is negative next year (-0.5 per cent). Relative to previous forecasts, the average private-sector worker is set to earn £670 less in 2027 in real terms.
Simon Pittaway, Principal Economist at the Resolution Foundation, said:
“Today is a tale of two rises from the Bank – a widely expected increase in interest rates and a more surprising jump in its inflation forecast.
“Mortgagors are unlikely to be affected by today’s already priced in rate rise, but they have been affected by conflict in the Middle East which has pushed up monthly mortgage costs for a typical first-time buyer by £140 a month.
“The big increase in the outlook for inflation – now forecast to peak at almost 5 per cent next spring – is a major worry for households. High inflation will shrink real-terms pay packets – which are set to be £670 lower next year compared to previous forecasts – and risk outstripping rises in benefits and the state pension too. The £100 Council Tax rebates announced in the Budget last week look pretty small by comparison.”