The Bank of England has warned that a million homes in the UK will have their mortgage payments increased by £500 a month by the end of 2026 due to rising interest rates. The central bank's Financial Stability Report said that the average mortgage holder rolling onto a new deal in the second half of this year will see their monthly repayments jump £220.
The Bank of England said that the rise in mortgage payments is being driven by the Bank's decision to raise interest rates in an effort to curb inflation. The base rate has now been increased to 5%, its highest level in 13 years, and the Bank is expected to raise rates further in the coming months.
The rise in interest rates is having a knock-on effect on mortgage rates, which have also been rising. The average two-year fixed-rate mortgage is now around 5.5%, up from around 3% a year ago. This means that homeowners who are currently on a fixed-rate deal and come to the end of their term will see their monthly payments increase significantly.
The Bank of England's warning comes at a time when many households are already feeling the squeeze from rising living costs, and many homeowners will struggle to make ends meet as their mortgage payments increase.
As the CEO of Flyt Properties, this news also has pretty worrying implications for those involved in property investment, and even those of us in Scotland will feel the rippling effects. With mortgages increasing on so many properties, sourcing and purchasing property may become more difficult than ever, especially for those who are still developing their property portfolio.
The Bank of England's warning is a stark reminder of the impact that rising interest rates can have on household finances.
Because of this, having passive income is more important than ever, so it’s a great time to begin thinking about building a property portfolio before it becomes drastically more difficult. If you’re looking to turn your unused property into serviced accommodation, or want help sourcing property for this, get in touch with Flyt Properties and let’s work together to get ahead before the mortgage shock catches up to us all.
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