Saima Siddiqui thought she had locked in a good deal when she bought her one-bedroom flat in Surrey five years ago. The 33-year-old secured a 1.8% fixed rate for the duration. Now, as she prepares to refinance for the first time, she is staring at an extra £200 a month. “It means I’m going to have to be more careful with other things,” she said. “It was alright as it was, but the extra £200 means I’m going to have to budget a lot more carefully.”
Her shock is shared by a million more homeowners than previously expected. The Bank of England’s Financial Stability Report, published after the outbreak of the Iran war, now forecasts that just over five million homeowners will see their monthly mortgage repayments increase by the end of 2028. That is up from four million projected in December.
“Bank of England forecasts one million more homeowners face higher mortgage payments due to Iran war impact.”
For a typical owner-occupier rolling off a fixed rate in the next two years, the increase is likely to be £45 a month, the Bank said. While that is far gentler than the £120 rise faced by those who renegotiated between the end of 2022 and end of 2024, the cumulative effect is still significant. Worse still, 750,000 homeowners currently paying less than 3% interest will see their deals expire this year, triggering an average jump of £170 per month.
Siddiqui, living alone, fits that category. “It was quite a surprise that the jump was so much,” she said. “I know I had a good deal, but it is quite worrying. If it does continue to increase in the same way, it is difficult to continue to live at the same standard if your salary doesn’t increase in the same way.”
More than eight in 10 mortgage customers have fixed-rate deals, meaning their payments stay flat until the term ends – typically after two or five years – after which they must choose a new product. By the end of 2028, over two million borrowers on two-year fixed deals are projected to remortgage close to their existing rate, sparing them a sharp rise. But the Bank warned that, because of the Iran conflict, these borrowers are now unlikely to see any fall in repayments over coming years, contrary to earlier forecasts.
While the Financial Stability Report stressed the overall hit would not be as severe as the crunch of recent years, Siddiqui’s story underscores the personal strain behind the numbers. With her salary unlikely to match inflation, the extra £200 each month means a tighter budget – and no end in sight.