Five million UK households will be hit by £240 monthly bill in Cost of Living

The extra hit by 2026 will come as homeowners face renewing their mortgage loan at a much higher rate than secured in 2021, it has been warned this week by mortgage experts.

Five million households are set to be hit with a £240 monthly increase in mortgage bills. The extra hit by 2026 will come as homeowners face renewing their mortgage loan at a much higher rate than secured in 2021, it has been warned this week by mortgage experts.

Mortgage rates have since shot up to 6.5 per cent and the Bank of England has warned that for the average borrower “rolling off a fixed rate between [April to June] 2023 and the end of 2026, their monthly mortgage repayments are projected to increase by around £240, or around 39 per cent.”

Sarah Breedon, deputy governor responsible for financial stability, said the Bank was “watching” the shift because of concerns about Brits having mortgage loans into retirement, when they might not be working and have income to cover monthly costs.

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The Bank said: “Household finances remain stretched by increased living costs and higher interest rates, some of which has yet to be reflected in higher mortgage repayments. Arrears for secured and unsecured credit remain low but are rising as the impact of higher repayments is felt by borrowers.”

Eric Leenders, managing director of personal finance at UK Finance, said this week: “While the cost of living continues to challenge households, many are managing to avoid using overdrafts and still have a savings cushion to draw on. Sustained house prices and rising mortgage rates have meant mortgage lending remained weak last quarter, and we expect this to continue in the fourth quarter of this year.”

Andrew Bailey, the governor, emphasised that the UK banking sector remained well capitalised and had come through the Bank's recent stress tests well. He added: "If economic and financial conditions were to materially worsen for households and businesses, our banking sector has the capacity to support them."