One Million More UK Homeowners to Face Higher Mortgage Payments

The Bank of England (BoE) has warned that an additional one million UK homeowners are expected to face higher mortgage payments over the next two years. According to the Bank's latest Financial Stability Report, more than five million households in total are projected to see increases in their mortgage costs by the end of 2028. This figure is higher than the four million previously forecast in December.

For the average homeowner whose fixed-rate mortgage deal is expiring, an average monthly increase of £45 is anticipated. However, for approximately 750,000 households currently paying less than 3% interest and whose fixed-rate mortgages are set to roll off in 2026, the average monthly repayment increase could be as high as £170.

This development is closely linked to rising borrowing costs and increased energy prices. Geopolitical tensions, particularly those related to the conflict in Iran, have contributed to surging global energy prices, which in turn impact household finances. The Bank of England emphasizes that these higher borrowing costs and energy prices could place additional pressure on household budgets.

The Bank of England's policy rate currently stands at 3.75%. The Bank had reduced its base rate from 4% to 3.75% in December 2025 and maintained this level at its most recent meeting in June 2026. The inflation rate is currently at 2.8%, remaining above the Bank's target of 2%. This environment necessitates a cautious approach from monetary policymakers regarding interest rates.

Analysts and market expectations suggest that uncertainty in the mortgage market may persist in the coming period. While some experts indicate that an emerging mortgage price war could push rates lower, they also caution that global factors, exacerbated by the Middle East conflict, are increasing uncertainty. Despite these pressures, the Bank of England has stressed that UK household and corporate debt levels remain low compared to historical averages and are resilient to potential shocks, though financial strains are expected to grow.