Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

BoE: Mortgage Repayments to Rise by £45 Over Next Two Years

The Bank of England (BoE) has reported that mortgage repayments for most owner-occupiers are expected to rise by just £45 over the next two years. This projection comes from the Financial Policy Committee’s (FPC) latest Financial Stability Report, which also notes that a larger number of households will see their repayments increase by the end of 2028.

According to the FPC, just over five million households are set to experience higher mortgage repayments, up from nearly four million reported in December. The increase is attributed to quoted rates on new mortgages being 72 basis points higher than in the previous report. The average two-year fixed rate at 75% loan to value (LTV) now stands at 4.92%, while the typical two-year fixed rate at 90% LTV is 5.32%, which is 75 basis points higher than in December.

The FPC highlighted that the expected £45 rise in repayments is significantly smaller than the £120 increase seen between the end of 2022 and 2024. However, nearly 750,000 households currently paying interest of less than 3% on fixed rates secured before 2022 will see their repayments rise by £170 per month on average when their deals end in 2026.

The report also notes that the share of post-tax household income spent on mortgage repayments (the debt servicing ratio) was flat at 7.5% at the end of last year, with a marginal increase to just above 8% predicted by the end of 2028 if higher energy prices persist. Signs of financial distress among households remain limited, with the share of mortgages in arrears above 2.5% at 0.9%, close to long-term averages.

The FPC observed a rise in high loan-to-income (LTI) lending, with the share increasing to 13.2% in Q1 2026, up from 11.8% in the previous quarter. The four-quarter rolling average stands at 10.8%, below the 15% aggregate limit. Mortgage approvals were broadly flat in Q1 and mixed in Q2, with a rise in April followed by a drop to the lowest level since 2023 in May. The FPC expects approvals to remain muted due to ongoing uncertainty and weaker macroeconomic conditions, though mortgage supply is expected to stay strong.

These trends are relevant for UK letting agents and inventory clerks monitoring market stability and tenant affordability, as changes in mortgage repayments can influence rental demand and landlord finances.