Warning as five million households to be hit with £240 monthly increase in mortgage bills
FIVE million households will be hit with a £240 monthly increase in their mortgage bills, the Bank of England has warned.
The extra hit by 2026 will come as homeowners face renewing their mortgage loan at a much higher rate than secured in 2021, when interest rates were 0.5 per cent and the average mortgage rate was 2.25 per cent.
Mortgage rates have since shot up to 6.5 per cent as the Bank of England has hiked interest rates rapidly to 5.25 per cent.
The Bank said that 55 per cent of mortgage borrowers, 5.5 million, had already been hit with much higher home loan costs when they renewed their mortgages.
The Bank said that for the average borrower “rolling off a fixed rate between [April to June] 2023 and the end of 2026, their monthly mortgage repayments are projected to increase by around £240, or around 39 per cent.”
Sarah Breedon, deputy governor responsible for financial stability, said that more people and younger borrowers were taking long-dated mortgages of up to 35 years to try and reduce monthly costs.
Ms Breedon said the Bank was “watching” the shift because of concerns about Brits having mortgage loans into retirement, when they might not be working and have income to cover monthly costs.
Despite the higher mortgage bills, the Bank said that far fewer people would default than in the 2008 financial crash because wages are higher and personal debts are lower.