Reported by The Guardian
More than 2.3m households face jump in payments in 2027, after expected increase in Bank of England rate this week
More than 2.3m UK households face a sharp rise in mortgage payments as they come off fixed-rate deals in 2027, with the Bank of England expected to begin raising interest rates this week.
The Bank’s nine-member monetary policy committee (MPC) is widely expected to increase the base rate from 3.75% to 4% on 5 November after UK inflation rose further to 3.5% in September.
More from the original report
It could be the first of four quarter-point rises over the next 12 months, according to financial market expectations, which would exacerbate the financial pressure on households grappling with higher energy and food bills.
Thousands of borrowers are due to come off fixed contracts in the final months of this year, with 700,000 having been forecast to switch over to new rates between July and December.
A further 2.3m households will reach the end of their fixed rates next year, according to data collected by UK Finance, a banking industry body.
There has been no change in the Bank of England base rate since December last year, but volatility in the bond markets – triggered in part by energy prices and inflation fears linked to the war in the Middle East – has driven up the swap rates that affect the pricing of fixed-rate mortgages .
An increase in the Bank of England rate could drive those rates, and wider household costs, even higher.
Data released last week showed that mortgage approvals in the UK fell to a near three-year low in September as potential buyers were deterred by the jump in borrowing costs.
Alongside last week’s budget, the Office for Budget Responsibility (OBR) warned that household disposable incomes would fall by 0.6% next year after taking account of inflation. The downgrade compares with the 0.6% increase in disposable incomes the watchdog had forecast in March – an outlook the OBR’s David Miles described as “a pretty grim picture”.
That income squeeze is also being driven by the energy price shock, which the OBR said would…