Bank of England Warns 5.2 Million Borrowers Face Higher Mortgage Costs

What Has the Bank of England Said?

The Bank of England's Financial Policy Committee has warned that the ongoing US–Israel–Iran conflict could push mortgage payments higher for an additional 1.3 million borrowers across the UK by the end of 2028.

Before the war began, the Bank expected around 3.9 million mortgage borrowers to face higher repayments before 2029. That figure has now jumped to 5.2 million, reflecting the economic fallout from surging oil prices and renewed inflation fears.

However, the Bank stopped short of forecasting a crisis. It stressed that average payment increases would be "modest in comparison to those experienced in recent years, as most mortgagors were already on higher rates." The UK banking system, it said, would remain capable of supporting households and businesses "even if economic and financial conditions were to be substantially worse than expected."

For expert analysis of how these changes affect your mortgage, visit The Mortgage Genie.

Payment Shock: What Does It Mean for Borrowers?

"Payment shock" refers to the jump borrowers face when their current fixed-rate deal ends and they move to a higher rate — either a new fix or their lender's standard variable rate (SVR).

The Bank of England's report makes clear that while the number of borrowers facing payment shock has increased significantly, the scale of individual increases is expected to be more manageable than the chaos that followed Liz Truss's 2022 minibudget.

That said, for borrowers on tight budgets — particularly first-time buyers who stretched to get on the ladder — even modest increases of £50–£100 per month can feel severe. If you're worried about affordability, speaking to a fee-free mortgage broker early is critical.

How Has the Mortgage Market Responded?

The UK mortgage market has taken a sharp hit since the conflict began. According to the Bank of England, the number of mortgage products available across the UK has plunged by around 1,500, although this pullback has been less severe than the product cull that followed the Truss minibudget.

Major lenders have been repricing at speed. Barclays increased rates by as much as 40 basis points on a range of its existing-customer residential mortgages, while scores of other lenders have withdrawn products with just hours' notice.

Industry expectations of lower rates by end of year have been tempered. A recent industry poll showed 38% of UK mortgage professionals now expect the Bank of England to hike rates twice this year, with 34% expecting one rate increase and just 20% anticipating no change.

As The Mortgage Genie has highlighted, acting quickly to secure a rate is more important than ever in this environment.

What Does This Mean for the Housing Market?

Homebuilder sentiment is also weakening. Construction giant Berkeley Group announced it was pausing new land acquisitions and slowing investment because of the weaker housing market outlook, sending its shares to their lowest level in a decade.

For buyers, this creates a mixed picture. While house prices hit record highs earlier in 2026, the combination of rising mortgage rates and builder caution could slow price growth — potentially opening windows for first-time buyers willing to act decisively.

Meanwhile, remortgage pressure is building early. Brokers report that borrowers whose fixed rates don't end until late 2026 are already reaching out to lock in deals — a sign of how jittery the market has become.

What Should You Do Next?

If you're buying, moving, or your current mortgage deal ends in the next six months, here's what to consider:

1. Lock in a rate now — Most mortgage offers are valid for 3–6 months, so securing today's pricing protects you from further increases
2. Don't wait for the "perfect" rate — In volatile markets, the best deal is the one you can secure today. You can always remortgage later if rates improve
3. Speak to a fee-free broker — At The Mortgage Genie, we search the whole market at no cost to you
4. Review your affordability — Use our affordability guide to understand how rate changes affect what you can borrow
5. Consider protection — With uncertainty rising, income protection and life insurance become even more important

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