One Million More UK Homeowners to Face Higher Mortgage Costs by 2028

The Bank of England forecasts that over five million UK homeowners will face higher mortgage payments by 2028 due to the Iran war impact, with lower-income households more vulnerable to rising costs and AI-related risks highlighted.

Mortgage Costs to Rise for More UK Homeowners Due to Iran War Impact

The ongoing conflict in Iran has led to an increase in the number of UK homeowners expected to face higher mortgage payments than previously forecast by the Bank of England.

According to the Bank's latest projections, just over five million homeowners will see their monthly mortgage repayments rise by the end of 2028. This figure has increased from the four million homeowners projected in December.

Despite this rise, the Bank's Financial Stability Report indicates that the impact will not be as severe as the increases experienced in recent years.

A typical owner-occupier whose fixed-rate mortgage deal expires within the next two years is likely to encounter an average monthly increase of £45. This is notably lower than the typical £120 rise faced by those securing new mortgage deals between the end of 2022 and the end of 2024.

Currently, more than 80% of mortgage customers hold fixed-rate deals. These mortgages maintain a constant interest rate until the deal expires, usually after two or five years, at which point a new deal is selected.

How Much Could My Mortgage Payments Change?

The Bank of England provides a calculator tool to estimate potential changes in mortgage payments based on mortgage size, length, and fixed interest rates. However, it cautions that the information provided may not be sufficient to fully pay off the mortgage within the specified term.

This calculator does not constitute financial advice. It is based on a standard mortgage repayment formula dependent on the mortgage size and length and a fixed interest rate. It should be used as a guide only and does not represent the suitability, eligibility or availability of mortgage offers for users. For exact figures, users will need to approach an official mortgage lender.

Interest rates fluctuate in response to the Bank of England's base rate and prevailing market conditions.

Impact on Lower Income Households and Household Finances

The Bank's report also highlights that lower-income households, including renters, are more vulnerable to rising energy prices.

They spend a larger share of their income on essentials, limiting their ability to adjust spending in response to higher prices,

the report stated.

Nevertheless, the overall assessment suggests that household finances remain resilient despite the challenging external environment.

Household debt levels continue to be low relative to historical averages. While some vulnerable, low-income households remain more exposed, the Bank believes that debt is unlikely to cause significant reductions in consumer spending.