MORE than three million households are still set to witness hikes in their mortgage repayments over the next two years.
Around 400,000 of these households will see "very large increases" of more than 50%, according to The Bank of England's Financial Policy Committee (FPC).
This is the latest blow to homeowners who will have seen the majority of their monthly outgoings rise due to high inflation.
The central bank said UK lenders are still in a strong position to support households, even if the economic gets worse.
But it added that there are “global vulnerabilities” for the sector, including “policy uncertainty” associated with upcoming elections across the world, including in the UK, the US and France in the coming months.
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The Bank’s latest report showed that most households have already had an increase in their mortgage rates since borrowing costs began rising at a rapid pace in 2022.
But over three million are still paying below 3% on their mortgage and.
These households are expected to see an increase in their payments between now and the end of 2026.
A typical household rolling off a fixed-rate mortgage before the end of 2026 is due to face a jump of around £180 a month, the report said.
A fixed-rate mortgage is where you agree an interest rate with the lender and you make the same monthly payments for the duration of the deal.
The bank also highlighted that a growing number of households have been borrowing over a longer period of time, reducing monthly repayments but leaving them with more debt to pay back.
The Sun exclusively revealed that longer mortgage terms could see households pay as much as £450,000 in added interest.
Higher mortgage rates have resulted in many households and renters reducing their savings, the Bank also found.
The current average mortgage rate for a five-year fixed rate mortgage is currently 5.52%, according to financial website Moneyfacts.
Back in 2019 the same deal was 2.24 per cent, so buyers are facing higher costs.
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It comes with markets expecting the Bank of England to cut its base rate in August this year after policymakers kept it at 5.25% in June.
This is important for buyers because high street banks and lenders use the BoE base rate to set their own interest rates on mortgages, loans and savings accounts.
So if it comes down, interest on mortgages rates and loans is likely to fall as well.
What is going on with mortgages rates?
It is not all doom and gloom.
Borrows have seen some relief in recent weeks with a number of high street lenders cutting the rates of their deals.
So far this week, NatWest, Barclays and HSBC have all announced cuts to their rates.
Both NatWest and Barclays slashed rates by up to 0.31%.
Meanwhile, HSBC cut more than 300 deals across its residential and Buy to Let mortgage ranges.
Ben Perks, managing director at Orchard Financial Advisers, said: "Rates are starting to go down like a cold drink in the sunshine.
"As swaps continue to trickle downward, lenders are starting to look at releasing more favourable products.
"It is a welcome sight and one that we I'm sure we'll see more of as other lenders join in.
"We need this pattern to continue over the coming months, then an August base rate reduction could kickstart the property market going into the final quarter of the year," he added.
What to do if you are struggling to pay your mortgage?
High inflation has put pressure on many families but there is help if you are struggling to make payments on your mortgage.
If you're finding it hard to pay your mortgage, you might be able to:
- Reduce your household costs or increase the money you have coming in
- Switch to a cheaper mortgage deal
- Reduce your mortgage payments
- Reduce payments on a shared ownership property
- Change payments on your endowment policy
You should also look at your household budget regularly to see if you can save money in other ways.
The Citizens Advice website has an advice page here which may be able to provide some help.
If you have already missed a mortgage payment you must take action quickly to stop yourself falling into debt.
Your mortgage lender will likely have been in contact with you if you owe them money - make sure you don’t ignore them.
You must explain your situation and tell them you’re trying to work out how to pay back the money you owe.
Otherwise you could be at risk of having your house repossessed.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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