The Bank of England has warned that almost one million homeowners’ fixed-rate mortgages will climb by about \u00a3500 per month by 2026.<\/p>\n\n\n\n
According to the Bank’s projections, higher interest rates will cause a substantial increase in mortgage costs across the country.<\/p>\n\n\n\n
It comes as the UK’s main banks have passed yearly stress tests, indicating that they are strong enough to continue lending to clients and businesses even if the economy suffers a catastrophic downturn.<\/p>\n\n\n\n
However, the Financial Stability Report stated that increased borrowing rates and living costs are putting a strain on small enterprises and households. Here’s how your mortgage might change in the coming years.<\/p>\n\n\n\n
Fixed-rate mortgage holders are facing difficulties as arrangements expire and the average cost of monthly payments rises.<\/p>\n\n\n\n
It comes as people continue to struggle with rising living costs and rising interest rates.<\/p>\n\n\n\n
When fixed-term mortgage terms expire, borrowers are forced to pick between more expensive deals or a costly Standard Variable Rate (SVR).<\/p>\n\n\n\n
Higher interest rates are progressively affecting homeowners who have a fixed-rate mortgage for two or five years.<\/p>\n\n\n\n
If they refinance during the second half of this year, the average household’s monthly interest payments will rise by roughly \u00a3220, and their rate will rise by about 3.25 percentage points.<\/p>\n\n\n\n
UK households are facing\u00a0higher debt burdens\u00a0against rising interest rates, with more mortgage holders coming to the end of their fixed-rate deals. This means people owe more money to banks.<\/p>\n\n\n\n
Households\u2019 use of\u00a0consumer debt\u00a0has increased, and the number of people falling into arrears increased slightly in the first quarter of 2023, the Bank found.<\/p>\n\n\n\n
Higher interest rates are also putting some firms under pressure, especially smaller businesses with more debt.<\/p>\n\n\n\n
Giving a press conference after the report was published, the\u00a0Governor of the Bank of England said there \u201cwill be consequences\u201d\u00a0of higher interest rates on borrowers.<\/p>\n\n\n\n
Speaking to reporters, the governor of the Bank of England Andrew Bailey said: \u201cIt is going to have an impact clearly. That is part of the transmission of monetary policy, no question about that.<\/p>\n\n\n\n
\u201cWhat we are seeking to do here is balance having the transmission of monetary policy with \u2013 the two things that I would emphasise \u2013 the resilience of the banking system, and the ability to support customers and therefore manage the consequences of this.<\/p>\n\n\n\n
\u201cBut there will be consequences from increased interest rates I\u2019m afraid because that, from a monetary policy perspective, is why we have to do it.\u201d<\/p>\n\n\n\n
The report stated that the proportion of income people spend on mortgage payments \u201cshould remain below the peaks experienced in the global financial crisis and in the early 90s\u201d.<\/p>\n\n\n\n
The\u00a0Bank of England\u00a0said the number of households with \u201chigh debt-service ratios\u201d \u2013 meaning they have borrowed more money than they can easily pay back \u2013 has increased, and will continue to do so in 2023.<\/p>\n\n\n\n
But added: \u201cIt is projected to remain some way below the historic peak reached in 2007.\u201d<\/p>\n\n\n\n
The annual stress test found that major UK banks are \u201cresilient\u201d against a scenario involving persistently high inflation, rising global interest rates, deep recessions in the UK and\u00a0higher unemployment.<\/p>\n\n","protected":false},"excerpt":{"rendered":"
The Bank of England has warned that almost one million homeowners’ fixed-rate mortgages will climb by about \u00a3500 per month by 2026. According to the Bank’s projections, higher interest rates … <\/p>\n