One million homeowners face £500 a month mortgage shock

Bank forecasts will put pressure on Jeremy Hunt to help homeowners in need. The Bank of England has warned that the mortgage shock will be at least £500 a month.

Homeowners with cheap fixed deals who re-mortgage by the end of 2026 will face a surge in spending at least £500. According to the Bank's economists, 6,000 a year.

Of the nearly 1 million people who receive at least £500 monthly raises, around 200,000 will see their accounts grow by £1,000 or more.

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The Bank of England has warned that Soaring home prices could put hundreds of thousands of families struggling to pay their mortgages.

Forecasts will put more pressure on the chancellor to help homeowners in need.

Jeremy Hunt agreed a «mortgage charter» with banks last month to help limit the impact of rate hikes. The lenders agreed to switch customers to interest-only mortgages and to extend loan periods if necessary.

However, the chancellor ruled out direct support for mortgage holders, arguing that this could cause inflation to rise.

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The Bank of England's outlook comes a day after average two-year mortgage rates hit a 15-year high of 6.66%.

The bank said people have struggled to limit the impact of the rate hike by borrowing for longer periods: one in 10 new mortgages is now 35 years or longer. There has also been a surge in the number of homeowners remortgaging their homes for longer periods.

Since the end of 2021, when the Bank of England began to raise interest rates, approximately 4.4 million mortgage holders have already experienced an increase in their mortgage costs . from the historical low of 0.1%

An additional 3.8 million households are expected to remortgage by the end of 2026 and face a surge in spending.

Mortgage payments for two million households remortgaging in the second half of 2023 will increase by 220 per month pounds. on average, the Bank of England reported in its latest Financial Stability Report.

The benchmark interest rate is currently 5%, but markets are predicting it could top 6% next year.

Rising mortgage costs will put severe financial pressure on many families, and 650,000 households could be in default by the end of the year, the Bank said. remain below the peak seen during the global financial crisis. 870,000 households passed the high risk threshold for delinquency in 2007.

The Bank of England said the economy has so far been resilient to rising levels of stress, but added: “It will take time for the full impact of higher interest rates to .