Five million mortgage borrowers face their monthly repayments rising by £240, the Bank of England warns

Five million mortgage holders will face a £240 increase in their monthly repayments over the next three years, the Bank of England has warned.

And for around 900,000 homeowners the increase will be £500 or more, according to the Bank's half-yearly Financial Stability Report.

The report highlighted that while households had so far proven 'resilient' in dealing with rising interest rates, many fixed-term households had not yet felt the full force of higher borrowing costs.

However, it suggested that the impact of higher interest rates on those worst affected now appears slightly less severe than previously thought.

The Bank estimates that the number of mortgage borrowers whose repayments would be so high that they would struggle to pay them will reach 440,000 by the end of next year, down from the last estimate of 650,000 in July – as wages rise.

Governor Andrew Bailey said: 'The full effect of higher interest rates has yet to take hold. That is why we remain vigilant about the risks to financial stability that may arise.

'So far, however, UK households and businesses as a whole have proven resilient to the impact of higher and more volatile interest rates.

'If we focus specifically on households, finances remain under pressure from the high cost of living.'

Mr Bailey said there were “encouraging signs” that households and businesses “are not and are unlikely to be as stressed” as “at certain points in the past”.

In its fight against inflation, the Bank has sharply raised interest rates from 0.1 percent in December 2021 to the current rate of 5.25 percent.

But there is speculation that interest rates, which have remained stable since the summer, could be cut by the middle of next year after inflation falls below 5 percent.

The predictions have led to mortgage lenders cutting the interest rates they offer borrowers, although these will still be much higher for those whose deals are coming to an end.

However, Mr Bailey has repeatedly played down the idea of ​​interest rates falling, saying yesterday that they were 'likely to remain at these levels for an extended period'.

Governor Andrew Bailey (pictured) said there were “encouraging signs” that households and businesses “are not and are not likely to be as stressed” as before

The comments come ahead of the Bank's final rates meeting of the year next week, when officials are expected to leave rates unchanged – although details of the decision will be picked up by economists for clues as to when the next move will come.

Yesterday's financial stability report said that around 5 million mortgages have been 'repriced' since the Bank started raising interest rates in 2021, and that around 5 million more mortgages will be affected by the end of 2026.

Borrowers will face an average increase in monthly repayments of 39 per cent, or £240.

But that's slightly less than the £250 projected in July.

Just under a million people will see a rise of less than £100 a month, but others will face a much steeper increase, with around 200,000 people facing a rise in repayments of £1,000 or more.

Figures from the Bank show that the share of household income spent on mortgage payments will rise from 6.8 percent to 9 percent by the end of 2026.

Just under a million people will see a rise of less than £100 per month, but others will face a much steeper increase, with around 200,000 people facing a rise in repayments of £1,000 per month.

That is the highest since the financial crisis fifteen years ago, when this percentage exceeded 10 percent.

The Bank also found that the proportion of households spending more than 70 percent of their income, after tax and essential income, on their mortgages stood at 1.4 percent, or 400,000, at the end of this year.

But that's a decrease of about 100,000 from the beginning of the year.

This percentage is expected to rise to 1.6 percent, or 440,000 households, by the end of 2024.

But it is less than previously expected, because wages have risen sharply.

Meanwhile, there is increasing evidence that borrowers are opting for longer-term mortgages, with an increase in the number of home loans repaid over periods of more than 35 years.

Overall, the report assessed that the 'risk environment' for the financial sector 'remains challenging'.

That reflected “subdued economic activity, further risks to the global growth and inflation outlook and increased geopolitical tensions.”

The report flagged global risks, including war in the Middle East – and its potential to drive up oil prices – and China's debt-laden real estate market.