UK households have been warned MILLIONS could see hikes to their mortgage repayments over the next three years. The Bank of England has warned this will include £500-per-month hikes for the mortgages of around 420,000 households.
Between 1 million and 1.5 million people are set to see a second increase in rates, too, they warn. About 31 per cent of all mortgages, or 2.7 million people, are expected to refinance onto a rate of more than 3 per cent for the first time before the final quarter of 2027.
A typical household rolling off a fixed-rate mortgage in the next two years is due to face a jump of around £146 a month, the report said – down on the last projection of £180 in June. “While many UK households, including renters, are still facing pressures from the increased cost of living and higher interest rates, the share of households who are behind in paying their mortgages is low by historical standards” the report says.
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“And the share of households spending a high proportion of their income on mortgage payments is expected to remain low.” The BoE forecasts some 2.7m homeowners will refinance onto a mortgage rate of over 3% for the first time before the end of 2027.
Following recent elections, “a range of macroeconomic and financial policies may change under newly-elected governments” leading to international “fragmentation,” they warned. This fragmentation “poses risks to UK financial stability”, the Bank said.
“A reduction in the degree of international policy cooperation could hinder progress by authorities in improving the resilience of the financial system and its ability to absorb future shocks,” it added. David Hollingworth, from L&C Mortgages, said: “Swap rates (which lenders use to price mortgages) look set to edge up further, which will put further upward pressure on fixed rates despite there being a mix of ups and downs in the early stages of the new year.
“Given the sharp pricing that lenders have been employing there will be only so much that they will be able to absorb before any further rises hit fixed-rate mortgages. In the current market it looks sensible for any borrowers looking to arrange a new fixed rate to secure a deal sooner rather than later, starting the process a good three to four months ahead.
“That will mean they secure a deal and avoid any potential hikes to rates but will still have the ability to move to a better rate if there is any subsequent improvement before completion.”