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Bank of England Financial Stability Report: "Though rates are coming down, this will not mitigate the shock many are due to experience"

ended 27. June 2024

In its quarterly Financial Policy Summary published this morning, the Bank of England warned that over 3m households are set to see their mortgage payments go up in the next two years. It said: “But many mortgagors coming to the end of fixed-rate deals will see increased borrowing costs as they have yet to refinance onto higher rates. While most fixed-rate mortgages have repriced since mortgage rates started to rise in 2021 H2, the full impact of higher interest rates has not yet passed through to all mortgagors. Over three million, or 35%, of mortgage accounts are still paying rates of less than 3%; the majority of whom will have their fixed rate expire before end-2026. For the typical owner-occupier mortgagor rolling off a fixed rate between June 2024 and end-2026, their monthly mortgage repayments are projected to increase by around £180, or around 28% (Chart 3.1). Within that average, a relatively small proportion are likely to experience some very large increases – around 400,000 households will see an increase in their payment of 50% or more.” Newspage asked brokers foir their views, below.

10 responses from the Newspage community

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Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
The Bank of England has the tools to do something to ease the immense pressure on beleaguered borrowers, ane help the millions it identifies, but instead most of the Monetary Policy Committee members are standing around like statues.
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Craig FishVerified
Director at Lodestone Mortgages
It's astonishing that the Bank of England are happy to produce reports telling of the misery that millions of homeowners are yet to face, when they have the tools at their disposal to lessen this misery considerably before it becomes a reality. The way that interest rates are set and those that set them needs to change. These people can no longer be trusted with such power and responsibility.
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Bob SinghVerified
Founder at Chess Mortgages
Successive base rate rises since borrowers last fixed their mortgages have significantly heightened their anxiety as to what will happen when their low rates end. While the long-term forecast is positive, it still means many borrowers will move to rates as much as 100% higher than the ones they leave behind, resulting in a significant payment shock. Given that senior bankers expect rates to not go below 3%, pay rates will be around 3.5% when many might be coming out of rates around 1%-2%. Until all cheap rate mortgages end and we enter a new norm, households will continue to feels the tremors left by Liz Truss and co.
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Andrew MontlakeVerified
Managing Director at Coreco
Borrowers know what's coming and many on lower mortgage rates are getting their ducks in a row now to prepare for the bigger monthly outgoings. But the reality is many households are going to find themselves in an extremely difficult position when their current fixed rate ends. Borrowers who are concerned should be speaking to a professional mortgage adviser as early as possible as there are ways to help mitigate these rises. There's something awkward about the Bank of England identifying a problem that it has the power to resolve.
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Emma JonesVerified
Managing Director at Whenthebanksaysno.co.uk
The stark reality is that a lot of people have yet to come off ultra-low rates onto the higher rates available today. When they do, there is going to be a lot of payment shock. Even though this week has seen major lenders reduce rates across the board, they are still far higher than what many people are paying now. The irony is that the Bank of England has the power to help the very people it is talking about.
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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
Even a base rate cut in August is not going to end the misery for many households across the country. If anything, it is likely to become tougher before things improve as the Mortgage Charter has propped up the market. Though rates are coming down, this will not mitigate the shock many are due to experience.
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Ben PerksVerified
Managing Director at Orchard Financial Advisers
So they are are aware of the problems facing borrowers, but are choosing not to do anything about it. I think they’ll be shocked to see where mortgage arrears are headed. More lenient lenders have allowed people to delay the onset of arrears, but they will come. Higher house prices have led to higher borrowing amounts and the sudden hike in interest rates has caught many people out. Today’s crisis is not comparable with events of the past.
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Simon BridglandVerified
Director at Charwin Private Clients
3 million more households are going to feel the wrath of higher interest rates, as the ultra-low deals they’ve enjoyed have already high-tailed it out of here a few years ago. When these borrowers find themselves a new mortgage product or, worse, stay on their lenders' standard variable rate, the pain will be felt acutely in their pockets. Hopefully many will have been preparing themselves for the inevitable hike in payments that they face. Paying off personal debts and not taking out loans or other forms of credit in readiness for the end of their existing deals will help. If they are really struggling to meet payments, they should talk to their existing lender about the support they could offer. Brokers can offer an early indication of what they will be faced with when the time comes.
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Ken JamesVerified
Director at Contractor Mortgage Services
With band aids still to be pulled off, many home owners are still blind to the financial implications of higher rates that lay ahead. One client of mine has made the tough decision to rent out his home and move back in with Parents, as he no longer is able to afford his own mortgage. We are seeing difficult decisions being made every day as the costs of lending have spiralled beyond many peoples affordability. The degrees of seperation between those able to deal with these costs and the ones who cannot I feel has shrunk, this is why the mortgage charter was so widely used as a means of holding back the tide, sadly the damns have broken and it has left a gaping hole that many struggle to fix.
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Hannah BashfordVerified
Director at Model Financial Solutions
The prospect of three million people transitioning to higher interest rates while already burdened by the cost of living is concerning. Historical data on arrears and repossessions do not reflect the current circumstances. It's crucial for policymakers to acknowledge the real-time impacts rather than relying solely on spreadsheets and past trends.