More than 2.3 million UK households may pay more for mortgages in 2027 — The Guardian

In the United Kingdom, more than 2.3 million households may face a significant increase in mortgage payments in 2027, when their fixed-rate agreements expire. This comes amid an expected rise in the Bank of England’s base rate from 3.75% to 4% on November 5.

As The Guardian reports, financial markets expect this could be the first of four increases of 0.25 percentage points over the next 12 months. At the same time, some economists in the City of London consider two rate rises by July more likely.

Expiry of fixed rates

In the second half of this year, about 700,000 borrowers are forecast to move to new lending terms. Another 2.3 million households will see their fixed-rate agreements expire next year, according to data from banking association UK Finance.

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The Bank of England’s base rate has remained unchanged since December last year. However, fluctuations in the bond market, partly linked to energy prices and inflation concerns due to the war in the Middle East, have already raised swap rates, which determine the price of fixed-rate mortgages.

Inflation and household costs

Inflation in the United Kingdom reached 3.5% in September. Bank of England Governor Andrew Bailey said the Monetary Policy Committee is monitoring whether rising prices are feeding through into higher wages. Such a second-round effect could contribute to inflation becoming entrenched.

The number of approved mortgages in September fell to almost a three-year low due to higher borrowing costs. The Office for Budget Responsibility forecasts that inflation-adjusted household disposable incomes will decline by 0.6% next year. According to EDF’s latest forecast, Ofgem’s energy price cap, which determines household bills, could increase by more than £400 in January.