Five million homeowners will see their monthly mortgage payments rise by the end of 2028. That’s the Bank of England’s latest projection, published in its Financial Stability Report, and it represents a sharp upward revision from the four million forecast just seven months ago.
The additional million borrowers now expected to face higher costs reflects the economic fallout from the Iran conflict, which pushed up energy prices, stoked inflation, and derailed expectations of steady rate cuts through 2026.
The headline numbers mask a wide range of outcomes. For the majority of owner-occupiers rolling off a fixed rate in the next two years, the Bank estimates a typical increase of £45 per month. That’s uncomfortable but manageable, and considerably less painful than the average £120 monthly rise experienced by those who remortgaged between late 2022 and end of 2024.
But 750,000 homeowners currently paying less than 3% interest will roll off those deals this year. Their average monthly increase: £170.
For Saima Siddiqui, a 33-year-old flat owner in Surrey, the reality is even steeper. She secured a 1.8% five-year fix when she bought her first home and now faces an extra £200 a month. “It was quite a surprise that the jump was so much,” she told the BBC. “If it does continue to increase in the same way, it is difficult to continue to live at the same standard if your salary doesn’t increase in the same way.”
The mechanism is straightforward. The US-Israeli strikes on Tehran in late February led to the closure of the Strait of Hormuz, choking off roughly a fifth of global energy supplies. Oil and gas prices surged. Inflation followed. Central banks that had been preparing to cut rates were forced to hold firm, and in some cases signal potential increases.
For UK mortgage borrowers, the impact was immediate. The average two-year fixed rate jumped from 4.83% at the start of March to 5.90% by 12 April, according to Moneyfacts. It has since pulled back to 5.49%, but remains well above where markets had expected it to be by midsummer.
More than eight in ten UK mortgage customers are on fixed-rate deals. The interest rate doesn’t change until the deal expires, typically after two or five years. When it does, borrowers must find a new product at whatever rate the market is offering.
The Bank wasn’t entirely gloomy. More than two million borrowers on two-year fixes expiring by end of 2028 are projected to remortgage close to their existing rate, seeing little change in monthly payments. The report also noted that household debt remains low relative to historical averages and that consumer spending isn’t expected to fall sharply.
The caveat: those two million borrowers had previously been expected to see their payments fall as rates declined. The Iran conflict hasn’t just created losers among the 750,000 on ultra-low fixes. It has eliminated gains that millions of others were counting on.
East Anglia is particularly exposed to mortgage rate sensitivity. Average property values across Norfolk and Suffolk are high enough that even modest rate shifts translate into meaningful monthly differences, yet incomes haven’t kept pace with the south-east’s salary inflation.
The Bank’s finding that lower-income households are more exposed to higher energy prices compounds the squeeze. Rural properties across the region, many reliant on oil-fired heating, face a double pressure: rising mortgage costs and elevated fuel bills.
For those approaching a remortgage, the message from the data is clear: lock in early rather than waiting for rates to fall further. The Ivybridge Collection’s local property market reports can help homeowners understand current valuations in their area before making decisions about refinancing or selling.
The Financial Stability Report lands at a sensitive moment politically. Andy Burnham is widely expected to succeed Sir Keir Starmer as Labour leader and prime minister this month, inheriting what the Bank itself describes as a “challenging” economic landscape.
The Office for Budget Responsibility, reporting separately on Tuesday, warned that public debt risks tripling to nearly 300% of GDP over the next 50 years without government action. Keeping debt at its projected 2030-31 level of 95% of GDP would require spending cuts equivalent to the entire education budget.
For homeowners, the political uncertainty adds another variable to an already complex calculation. Burnham’s proposed property tax reforms, including potential changes to stamp duty and council tax, could reshape the cost of buying and owning a home in ways that aren’t yet fully understood.
The Bank flagged two other risks worth watching. Rapid advances in AI have heightened concerns over cyber attacks on financial infrastructure. And valuations of AI stocks have become “more stretched,” raising the spectre of a correction that could ripple through consumer confidence and, by extension, housing demand.
Oil prices have fallen back to around $72 a barrel, and the Strait of Hormuz has partially reopened. But the situation remains fragile: Iran fired at least two missiles at commercial ships transiting the strait on Monday night, according to US officials.
If the ceasefire holds and energy prices stabilise, mortgage rates should continue their gradual retreat from April’s peak. If it doesn’t, the Bank’s forecast of five million affected homeowners may prove optimistic. For now, borrowers in Norwich, King’s Lynn, and across the region would do well to plan for the rates they can see, not the ones they’re hoping for.
