£500 jump in mortgage payments for 1 million households by 2026, Bank of England

Around a million households on fixed-rate mortgages face a £500 hike in their monthly payments by the end of 2026, the Bank of England has warned.

The average household will see their monthly interest payments go up by about £220 if they are refinancing during the second half of this year and see their rate rise by about 3.25 percentage points.

Around 4.5 million people with a fixed-rate mortgage have seen an increase in their monthly repayments since interest rates started to rise in late 2021, an analysis by the Bank found.

Another 4 million or so households on a typical two-year or five-year fixed deal will likely see their payments go up by the end of 2026.

However, a growing number of mortgage holders are either extending the length of their deal or overpaying their mortgage in order to cushion the impact of higher rates, the Bank said.

It came a day after mortgage rates surpassed the peak seen in the wake of Liz Truss’s disastrous mini-Budget last autumn – rising to the highest level since the financial crisis.

Average two-year fixed-rate deals reached 6.66 per cent on Tuesday, according to figures from Moneyfacts, after the Bank of England’s recent interest rate hikes pushed up the cost of borrowing, On Wednesday, that figure hit 6.7 per cent.

That is higher than the 6.65 per cent seen on 20 October 2022 amid the turmoil that followed Ms Truss and Kwasi Kwarteng’s budget and rates now stand at a level not seen since August 2008 at the height of the global financial crisis.

Two UK lenders, Santander and Nationwide Building Society, said customers moving to new deals were being hit by an average increase in payments of around £200 a month.

Shadow chancellor Rachel Reeves blamed the hit facing households on “the Tory mortgage bombshell”.

“13 years of Tory economic failure stretch far and wide – our broken housing market, insecure economy, soaring prices and broken public services,” she said.

Ms Reeves added that Labour would “build a stronger economy” with “ financial and economic security first”.