A million more homeowners are set to face higher mortgage bills than the Bank of England had previously expected, as the economic fallout from the Iran war drives up borrowing costs. The Bank now forecasts that just over five million homeowners will see their monthly repayments rise by the end of 2028 – up from four million projected in December. While the typical increase for those rolling off a fixed rate in the next two years is £45 a month, far less than the £120 rise seen between 2022 and 2024, the pain is much sharper for 750,000 homeowners still paying less than 3% interest. They are coming off those deals this year and face an average jump of £170 per month.
Saima Siddiqui, a 33-year-old who bought her one-bedroom flat in Surrey five years ago on a 1.8% fixed rate, will soon refinance for the first time. “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.” Living alone, she described the jump as “quite a surprise” and 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.”
“Bank of England warns one million more homeowners face higher mortgage bills than previously forecast due to Iran war impact.”
More than eight in 10 mortgage customers have fixed-rate deals, meaning their interest rate stays unchanged until the deal expires – typically after two or five years – and a new one is chosen to replace it. The Bank said more than two million borrowers on two-year fixed deals expiring by the end of 2028 were projected to remortgage close to their existing rate and see little change in repayments. But those borrowers are now unlikely to see repayments fall over the coming years, as had been forecast before the Iran conflict.