The Bank of England has told millions of households to prepare for “significant increases” in their mortgage repayments over the next two years.
The central bank’s Monetary Policy Committee (FPC) has warned that 3 million households could be forced to pay higher taxes, with around 400,000 seeing increases of “more than 50%”.
This equates to three million households, meaning the average family paying off their fixed rate mortgage by the end of 2026 could face a rise of around £180 a month.
Additionally, the bank’s report noted that there is an “increasing proportion” of households choosing to borrow for longer periods.
As a result, households’ monthly repayments were reduced, but they ended up with even more debt.
In particular, rising mortgage rates have encouraged many homeowners and renters to divert some of their hard-earned cash into savings.
In addition to this, the Bank of England noted that the proportion of renters who are behind on their rent payments jumped to 16.5% in the first quarter of 2024.
By comparison, the figure was 15.7 percent during the same period last year.
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The FPC report said: “Financial market investors continue to expect the economy to recover and inflation to fall.”
“They are placing less emphasis on risks, such as geopolitical developments or continued high inflation, that could lead to slower growth and keep interest rates higher than expected.”
“These risks increase the likelihood of a sharp asset price correction which could ultimately make borrowing more expensive and harder for UK households and businesses.”
The Bank of England’s Monetary Policy Committee is next due to make an announcement on interest rates on 4 July.