Millions of UK households face an average £107 increase in monthly mortgage payments as their fixed-rate deals expire, according to the Bank of England.
The central bank estimates that 3.6 million home loans, representing 41% of all outstanding mortgages, are due for renewal within the next three years.
However, the projected number of expiring mortgages is less than the Bank of England initially anticipated, and the expected monthly payment increase is below the previously forecast £146.
While some homeowners will see their mortgage costs rise, the impact of recent interest rate cuts is gradually being reflected in typical monthly mortgage payments, following four reductions by the Bank of England since last August.
Approximately 2.5 million households, or 28% of mortgage holders, are expected to experience a decrease in their mortgage payments over the next three years.
In related news, first-time buyers may find it easier to access mortgages, as regulators are allowing banks and building societies to relax restrictions on riskier lending.
According to the Bank of England’s latest Financial Stability Report, Governor Andrew Bailey stated that currently, just under 10% of new mortgages issued exceed 4.5 times a borrower’s income.
He indicated a willingness to see that percentage increase, suggesting a potential easing of lending standards.
Individual banks and building societies will now be permitted to exceed the previous 15% limit on higher loan-to-income mortgages.
This adjustment to the lending cap follows calls from the UK government for regulators to explore ways to stimulate economic growth.
The Bank of England estimates that this change could lead to up to 36,000 new higher loan-to-income mortgages annually.
However, the mortgage lending industry as a whole will still be required to adhere to a 15% limit on these higher-risk home loans.
In other economic developments, the Bank noted an increase in global financial instability, stemming from the US-led global trade war.
While the direct impact on British households and companies has been limited thus far, the Bank noted significant shifts occurring within the global financial system.
Specifically, the traditional strengthening of the US dollar as a safe-haven currency during periods of economic uncertainty appears to have been altered since the onset of the global tariff war.
The Bank of England reported that investors and large corporations, who previously did not feel the need to hedge against a weakening dollar, are now taking such precautions.
This activity has contributed to the weakening of the US dollar this year, which has already declined by approximately 10% against a range of currencies.
US President Donald Trump has expressed his desire for a weaker dollar, arguing that it will boost exports and stimulate job growth in US manufacturing.
However, a weaker dollar can also lead to higher prices for imported goods, potentially exacerbating inflationary pressures resulting from tariffs.