More than 4.4 million British homeowners are bracing for significant increases in their mortgage payments over the next three years, according to a stark warning from the Bank of England. The impact will be particularly severe for an estimated 1 to 1.5 million borrowers who, having already experienced one rate increase, will need to refinance at even higher rates by the end of 2027.
The central bank’s analysis reveals that 37 per cent of fixed-rate mortgage holders have been sheltered from the interest rate rises that began in late 2021. This protection is set to end, with 2.7 million homeowners, representing 31 per cent of all mortgages, facing rates exceeding 3 per cent for the first time. The Bank estimates that 420,000 borrowers will see their monthly payments surge by more than £500.
Some relief may be on the horizon for 2.4 million mortgage holders who previously moved to costlier deals, as recent interest rate cuts implemented since summer begin to take effect. The Bank’s latest financial stability report suggests that while British households and businesses should remain “resilient in aggregate,” the broader financial landscape presents escalating risks.
The Bank’s financial policy committee has highlighted mounting concerns about global risks, citing geopolitical tensions, global fragmentation, and pressures on sovereign debt levels. The committee emphasised that these risks hold particular significance for the UK, given its position as an open economy with a substantial financial sector.
The housing market faces unprecedented pressure as borrowers navigate this challenging environment, with many facing the prospect of significant increases in their cost of living. The situation underscores the delicate balance between maintaining financial stability and managing the impact on household finances.
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