Bank of England Warns Five Million Homeowners Face Higher Mortgages

The Bank of England projects that over five million UK homeowners will face increased monthly mortgage repayments by the end of 2028, an increase of one million over December projections. The rise is attributed to the Iran war, which closed the Strait of Hormuz shipping lane, drove up energy costs, and prompted central banks to hike interest rates.

Approximately 750,000 homeowners currently paying less than 3% interest will see the steepest increases, averaging £170 per month in 2026. A typical owner-occupier rolling off a fixed rate in the next two years expects a £45 monthly increase. Despite these pressures, the bank's July 2026 Financial Stability Report describes the UK financial system as resilient and notes that household debt levels remain low relative to historical averages.

To support the economy, the bank proposed regulatory changes allowing systemically important banks more flexibility in using capital buffers during market stress. However, the report warns that increased hedge fund leverage in AI-related stocks has created new market risks. Separately, the Office for Budget Responsibility warned that UK public debt could nearly triple to 300% of GDP over 50 years without government intervention.