Payment shock to increase – but don’t expect a meltdown
Before the war began, the Bank of England expected about 3.9 million mortgage borrows to face higher payments before the start of 2029. That figure has now jumped to 5.2 million, the Bank’s Financial Policy Committee said, although it stopped short of forecasting a crisis.
That’s because payment increases are expected to remain modest, especially by comparison with former prime minister Liz Truss’s disastrous 2022 minibudget, and the UK financial system looks capable of withstanding any war-related economic pain.
The country’s banking system would still be equipped to support households and businesses, the central bank said, “even if economic and financial conditions were to be substantially worse than expected.”
Average payment increases for borrowers, the central bank said, would be “modest in comparison to those experienced in recent years, as most mortgagors were already on higher rates.”
Mortgage market faces uncertain outlook as war continues
The UK mortgage market has taken a sharp hit since the beginning of the war. Scores of lenders have withdrawn products and hiked rates as a direct consequence of oil- and gilt-related shocks.