More than 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
Almost 30% of mortgagors are likely to see mortgage costs increase 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 dropping in the second half of this year, which would immediately benefit variable rate mortgagors, who account for nearly 18% of the total stock of mortgages.
Current market pricing also indicates 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, over 1.5 million households are likely to see their mortgage payments drop by the end of 2024 and nearly 2 million borrowers on variable rates or on short fixed rate mortgages will be better off by the end of 2026.
However, BoE says many mortgagors coming to the end of fixed rate deals will see higher borrowing costs as they have yet to refinance onto higher rates.
More than 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 estimated to rise by nearly £180, or almost 28%.
Within that average, BoE says some are likely to experience very large increases – nearly 400,000 households will see a rise in their payment of 50% or more.
Additionally, in response to elevated mortgage rates, a growing proportion of households are choosing to borrow over longer terms, which lowers monthly capital repayments in the near term but means they will have more debt to service further out.