Millions face £250 monthly mortgage rise in 2023

Mortgage payments are set to increase by around £3,000 a year for approximately four million homeowners next year, the Bank of England has warned.

In its Financial Stability Report published yesterday, the Bank has said the risk of households defaulting on debt has increased as economic conditions deteriorate.

People with a fixed-rate loans due to expire by the end of 2023 are facing rises to their repayments of around £250 a month on average, as they are forced to move onto a higher interest rate.

This would mean that mortgage costs surge by £3,000 a year for many households whose finances are pushed to the edge by the current cost-of-living crisis.

The new estimate is based on market lenders’ interest rates at the end of November. The Bank’s base rate is currently set at 3%, but is looking likely to increase again tomorrow – possibly to 3.5%.

The BoE predicted that 2.4% of households would find themselves with mortgage payments that they would find hard to afford.

“The risk that indebted households will default on loans, or sharply reduce their spending, has increased,” the report said.