The Bank of England has warned thousands of homeowners with a mortgage face increased monthly payments of more than £1,000.
The grim reading came as the BoE published its financial stability report, the Bank’s biannual health check on the UK economy.
The BoE estimated that by the end of 2026, around 200,000 households will see their monthly mortgage bills rise by £1,000 or more while around 1mln households with a fixed-rate mortgage will see their monthly mortgage repayments go up by about £500.
In a press conference following publication, BoE governor Andrew Bailey said the impact of rising mortgage payments “is going to have an impact, clearly. That is part of the transmission of monetary policy, no question about that.”
For the average household, monthly interest payments will go up by about £220 if they remortgage during the second half of this year and their rate goes up by about 3.25 percentage points.
Around 4.5mln people with a fixed-rate mortgage have seen their monthly repayments go up since interest rates started to rise in late 2021, the Bank found.
The BoE also warned about signs of rising stress among the most indebted consumers and smaller businesses due to rising interest rates.
It said the UK economy has so far been resilient to higher rates, though it will take time for the full impact of higher interest rates to come through.
At the press conference Bailey said: “It is the case that elements of the global financial system do remain vulnerable to increased interest rates and uncertainty surrounding the economic outlook, and of course tensions geopolitically speaking.”