Some 3m UK households are to be hit with further increases in mortgage repayments over the next two years, the Bank of England is warning.
Its latest Financial Stability Report says “very large increases” of over 50% will apply to the mortgages of around 400,000 households.
Currently some 35% (or three million) of households with mortgages pay with interest rates below 3% and will see an increase between now and the end of 2026.
A typical household rolling off a fixed-rate mortgage in the next 30 months will face a jump of some £180 a month, the BoE suggests.
The report accepts that most households have already had an increase in their mortgage rates since borrowing costs began rising substantially in 2022. Interest rates are at a 16-year-high of 5.25%, with no cut possible until at least August and possibly beyond.
The Bank highlights that a growing proportion of households borrow over a longer period of time to minimise monthly repayments but with more debt to service over time.
The BoE is particularly aware of burdens for renters, with the proportion of those behind on rent up to 16.5% in the first quarter of 2024, compared with 15.7% a year ago.
However, overall the Bank insists the overall risk environment for the economy and financial sector is unchanged with the banking sector having “the capacity to support households and businesses even if economic and financial conditions were to be substantially worse than expected.”