Full Breakdown
Bank of England Forecasts Higher Mortgage Bills Amid Iran War Impact
7/7/2026, 11:05:54 PM
Revised Mortgage Outlook: Over Five Million Affected
The Bank of England now projects over five million owner-occupiers will see higher mortgage repayments by end-2028, up from four million in December. The increase is linked to the Iran war, which added about one million borrowers to the affected group.
Context and Revised Projections
The earlier Financial Stability Report expected modest mortgage cost growth under stable global conditions. The Iran war prompted a reassessment, raising the number of households likely to face higher payments. The report notes that, despite the war’s impact, the strain on housing finance will be milder than the sharp rises seen recently.
Core Statistics
- 5 million+ homeowners expected higher payments by 2028.
- Typical roll-off increase in next two years: £45/month.
- New deals (2022-2024) average rise: £120/month.
- 750,000 sub-3 % borrowers rolling off this year: £170/month increase.
- 80 % hold fixed-rate contracts; >2 million two-year fixed deals expiring by 2028 likely to see little change, with future declines unlikely.
Borrower Impact and Risks
The outlook signals tighter cash flow for households. Borrowers leaving low-rate deals face the biggest absolute jumps, while standard fixed-rate customers see modest rises. The Bank warns that the absence of expected repayment declines could squeeze disposable income and raise mortgage-stress risk, though overall impact remains less severe than recent turbulence.
Bank of England Official Response
The Financial Stability Report stresses that the Iran war’s effect on mortgage payments will not be as harsh as recent spikes. It notes borrowers on two-year fixed contracts are unlikely to benefit from falling rates, and most homeowners will remain on fixed-rate products that cap immediate payment growth.
Verbatim Quotes
- “A typical owner-occupier rolling off a fixed rate in the next two years is likely to face an increase of £45 on their monthly mortgage bill, the Bank said, external.” — Bank of England
- “That compares to a typical rise of £120 for those getting a new deal between the end of 2022 and end of 2024.” — Bank of England
- “However, 750,000 homeowners who are paying less than 3% interest on their current deal would be rolling off these products this year and would see an average increase of £170 per month in repayments, the Bank said.” — Bank of England
- “More than eight in 10 mortgage customers have fixed-rate deals.” — Bank of England
Outlook and Monitoring
The Bank will keep tracking mortgage trends as the Iran conflict evolves, updating forecasts in future Financial Stability Reports. It stands ready to adjust monetary policy or regulation if repayment pressures rise, while aiming to preserve overall financial stability.
