5 Million UK Homeowners Face Higher Mortgage Costs: What the Bank of England Report Means Across the UK

The Bank of England's latest Financial Stability Report has revised upward its estimate of how many UK homeowners will face higher mortgage costs over the coming years, and the scale of the change, an extra one million households compared with the Bank's own forecast just seven months earlier, illustrates how quickly the outlook for borrowers can shift even without a change in the Bank's own base rate.

What changed since December

In its previous Financial Stability Report, published in December 2025, the Bank estimated that 3.9 million homeowners, around 43% of mortgage holders, would see their repayments rise when their current deal expired. The July 2026 report revises this to just over 5 million households by the end of 2028. The Bank attributed the change largely to shifts in financial market expectations for future interest rates following the conflict involving Iran, which altered the pricing of fixed-rate mortgage products across lenders even where the Bank's own policy rate had not moved.

Who is hit hardest, and when

The increase will not land on all affected households at once. Because over 8 in 10 UK mortgage holders are on fixed-rate deals, typically fixed for two or five years, the impact arrives in waves as each individual borrower's fix comes up for renewal. The group facing the sharpest single jump is around 750,000 households currently on fixed rates below 3%, who are due to roll off in 2026; the Bank projects their average monthly repayment will rise by around £170. Across all affected borrowers regardless of their current rate, the average increase is a more modest £45 a month, reflecting the fact that many borrowers coming off rates already closer to current market levels face a smaller adjustment.

The current average two-year fixed rate at 75% loan-to-value stands at 4.92%, 0.72 percentage points higher than at the time of the Bank's December report. The Bank was careful to frame the overall adjustment as more manageable than the sharp rises experienced during the post-pandemic period of high inflation, and stressed that UK household and corporate debt levels remain low relative to historical averages, leaving the financial system resilient to the shock even as individual households feel the squeeze.

Does this affect the whole UK equally?

The Bank's Financial Stability Report figures are UK-wide aggregates, but the practical impact varies meaningfully by nation and region, largely driven by differences in average mortgage size and how house price growth has moved locally. Homeowners in London and the South East, where average mortgage balances are highest, face the largest absolute pound increases for a given percentage-point rate rise, even where the rate change itself is identical to a borrower elsewhere. Conversely, in regions with lower average property values, including much of the North East, Wales and parts of Scotland, the same rate increase translates into a smaller cash increase, even though the proportional pressure on a tighter household budget can still be significant.

Scotland and Northern Ireland also have some distinct mortgage market features worth noting: Scotland's conveyancing process differs from England and Wales, which can affect the practical timeline for remortgaging or switching lender, while Northern Ireland has historically had a smaller pool of active mortgage lenders than the rest of the UK, which can mean less competitive choice when shopping around for a new deal. None of this changes the underlying Bank of England figures, but it does mean a homeowner's actual experience of this shock will differ depending on where in the UK they are, and how their local market has moved since they first took out their current deal.

Check how this could affect your own mortgage

The averages above give a sense of the national picture, but the actual change to your payments depends on your own loan size, remaining term, and the gap between your current rate and whatever you can find when you remortgage. Use the calculator below with your own numbers, comparing your current rate against 4.92%, the current UK average two-year fixed rate at 75% loan-to-value, to get a rough estimate.

What homeowners coming up for renewal should do

If your current fixed-rate deal is due to expire in the next six months, the most concrete step is to start comparing new rates now rather than waiting for the renewal date to arrive, since most lenders allow a new deal to be locked in three to six months ahead of the switch, protecting you against any further rate rises in the meantime while still allowing you to move to a cheaper deal if rates fall before completion. Comparing the whole market, rather than only your existing lender's retention offer, is where a mortgage broker typically adds the most value, since brokers have access to products and lenders that do not deal directly with the public, and can identify whether a fee-charging deal with a lower rate actually works out cheaper than a fee-free deal at a higher rate once the full term is calculated. For readers weighing up broker options as part of that comparison, we've covered what an online whole-of-market broker like Habito offers as one route worth considering alongside traditional high-street options.

If your household budget is genuinely tight and an increase of £45 to £170 a month would cause real difficulty, contact your lender before you miss a payment, rather than after. UK lenders are required to offer forbearance options, including extending the mortgage term or a temporary switch to interest-only payments, for customers in genuine financial difficulty, but these options are far easier to arrange proactively than once arrears have already built up.

How many UK homeowners are affected by rising mortgage costs?

The Bank of England expects over 5 million UK homeowners to face higher mortgage repayments by the end of 2028, up from a forecast of 3.9 million made in December 2025.

How much will my mortgage payment increase?

The average increase across all affected borrowers is around £45 a month, though homeowners currently on fixed rates below 3% face a larger average increase of around £170 a month when their deal expires in 2026.

Why did the Bank of England revise its forecast upward?

The Bank attributed the change primarily to shifts in financial market expectations for future interest rates following the conflict involving Iran, which affected fixed-rate mortgage pricing even without a change in the Bank's own policy rate.

Does this affect homeowners across the whole UK equally?

The Bank's figures are UK-wide, but the cash impact varies by region: areas with higher average mortgage balances, such as London and the South East, see larger pound increases for the same rate rise than regions with lower average property values.

What should I do if my fixed-rate mortgage is expiring soon?

Start comparing new deals three to six months before your current rate expires, since most lenders let you lock in a new rate ahead of time. Comparing the whole market, including through a mortgage broker, rather than only your existing lender's offer, is generally the most effective way to find the best available deal.

Last reviewed: 7 July 2026