A little over 5 million UK households are now projected to see their mortgage repayments increase by the end of 2028, according to the Bank of England's July 2026 Financial Stability Report. This figure is up from the nearly 4 million households previously forecast in December, meaning an additional one million homeowners face higher monthly bills. The revised projections follow escalating global tensions and conflict in the Middle East, which have driven up market interest rates and altered expectations for future borrowing costs.
Why are mortgage projections rising?
The conflict in the Middle East has created a significant negative supply shock, disrupting international commodity flows and driving energy prices higher. Oil prices hovered around $100 per barrel for several months after the conflict began, compared to a decade-long average of $68 per barrel. While the signing of a Memorandum of Understanding (MoU) between the United States and Iran in June had helped energy prices fall back to just above pre-conflict levels, the economic knock-on effects are still being felt.
In the UK, swap rates, which lenders use to price fixed-rate mortgages, have increased with financial markets now predicting that the Bank of England base rate will stay higher for longer.
Consequently, average quoted rates on new mortgages have jumped. According to the Bank's July 2026 report, the average rate on a typical two-year fixed 75% loan-to-value (LTV) mortgage has risen to 4.92%, up from the 4.20% recorded in December 2025. For a 90% LTV deal, which is often used by buyers with smaller deposits, the average rate has climbed from 4.57% in December 2025 to 5.32% today.
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What does this mean for homeowners?
The impact of these higher rates will vary significantly depending on when you last secured a mortgage deal:
- Typical borrower due to come off of a fixed deal - For a typical borrower moving off a fixed-rate deal over the next two years, monthly repayments are projected to increase by a relatively modest £45. This is notably smaller than the £120 increases experienced by borrowers between 2022 and 2024.
- Borrowers who have already fixed - Most homeowners with existing fixed deals due to expire in 2028 are expected to remortgage at a similar rate, seeing little overall change. Frustratingly, these borrowers are now highly unlikely to see their monthly payments drop, as had been predicted before the geopolitical shock.
- Those on older, low fixed rates - There are around 750,000 households that face the steepest hikes when their fixed term deals expire in 2026. Many will have been paying interest rates below 3% and will face an average payment spike of £170 per month.
While the current financial pressures are worrying, the Bank of England has confirmed that overall household finances are actually in a strong position. The amount of debt people hold relative to their earnings is at a normal level, indicating that most households are well-equipped to manage current challenges.
For the latest commentary on where interest rates are heading, check out our regularly updated article 'Will interest rates continue to fall in 2026 or start going back up?'
What will happen if interest rates rise or fall?
Enter the values below to calculate how your mortgage payments will change if rates rise or fall
To get started enter the original details of your mortgage and then enter the interest rate increase or decrease.
If you are on a variable rate or tracker mortgage:
- Enter the original mortgage loan amount borrowed when you took out your current mortgage (i.e £200,000)
- Select whether your mortgage type is repayment or interest-only
- Enter the number of years you planned to borrow for (the term) when you took out your existing mortgage
- Enter the current mortgage rate that you are paying, in the box titled “current rate” (i.e. 2%)
- Input the increase in the interest rate you want to use. For example, if you want to see how a rise of 1% in the mortgage rate (i.e from 2% to 3%) would affect your repayments enter “1” in the box titled “Change”. If you want to see the impact of a drop in interest rates, then enter a negative number.
- Click “Calculate”
Your results - The calculator will tell you the impact on your monthly mortgage payments. Just make sure that the “Current payment" matches your existing monthly mortgage payments.
Practical steps if your mortgage deal is ending
If you are one of the millions of homeowners facing a mortgage renewal over the next couple of years, taking proactive steps can help you secure the best available rate.
- Check your budget early - Work out exactly when your current fixed term expires. Homeowners rolling off cheap historical rates should calculate how an increase of £170 or more per month will affect their disposable income.
- Lock in a deal in advance - Many mortgage lenders allow you to secure a new product up to six months before your existing deal ends. If interest rates fall before your start date, you can typically switch to the cheaper rate without penalty.
- Improve your Loan-to-Value (LTV) - Lenders offer lower interest rates to borrowers with more equity in their homes. If you have spare savings, paying down a portion of your capital before remortgaging could move you into a cheaper LTV bracket.
- Shop around the entire market - Avoid simply rolling onto your current lender's Standard Variable Rate (SVR), which is almost always the most expensive option. Use comprehensive online comparison table* to track how daily rate fluctuations alter the cheapest deals.
- Speak to an independent broker - An independent mortgage broker can look across the whole market to find deals that are not always available to consumer platforms directly. They can provide tailored guidance on whether a tracker mortgage or a fixed-rate deal best suits your financial priorities. Our partner Habito* is a leading online mortgage broker and can help find you the best mortgage by checking over 20,000 mortgages from 95 mortgage lenders.
- Get a FREE mortgage review - Anyone wanting to know more about how rate rises and cuts impact their finances should speak with an independent mortgage adviser* as they can provide specialist advice.
Finally, make sure to bookmark our mortgage rate comparison tool and our roundup of the 'Best mortgage rates in the UK'.
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