400,000 households to see mortgage payments rise by over 50% despite rate cuts: BoE

Around 30% of mortgagors are likely to see mortgage costs rise by more than £100 a month by the end of 2026, despite predicted cuts to Bank Rate, according to the latest Bank of England Financial Stability Report.

Bank Rate is expected to start falling in the second half of this year, which would immediately benefit variable rate mortgagors, who account for around 18% of the total stock of mortgages.

Current market pricing also suggests a growing number of fixed rate mortgage holders, who are already paying higher rates, may be able to refinance at a lower interest rate over the next two years.

In total, more than 1.5 million households will see their mortgage payments fall by the end of this year and around 2 million borrowers on variable rates or on short fixed rate mortgages will be better off by the end of 2026.

However, the Bank says many mortgagors coming to the end of fixed rate deals will see increased borrowing costs as they have yet to refinance onto higher rates.

Over three million, or 35%, of mortgage accounts are still paying rates of less than 3%; the majority of whom will have their fixed rate expire before the end of 2026.

For the typical owner-occupier mortgagor rolling off a fixed rate between June 2024 and 2026, their monthly mortgage repayments are projected to increase by around £180, or around 28%.

Within that average, the Bank says some are likely to experience very large increases – around 400,000 households will see an increase in their payment of 50% or more.

In addition, in response to higher mortgage rates, an increasing proportion of households are choosing to borrow over longer terms, which reduces monthly capital repayments in the near term but means they will have more debt to service further out.