Millions of homeowners could see their mortgage repayments increase over the next few years, according to the latest forecasts from the Bank of England.

Its latest Financial Stability Report suggests that more than 5 million homeowners are expected to face higher monthly repayments by the end of 2028. That's one million more than the Bank predicted in December, with the change linked to the economic impact of the Iran conflict and higher energy prices.

What could this mean for borrowers?

The good news is that, for many people, the increases are expected to be more modest than those seen over the past couple of years.

The Bank estimates that a typical homeowner coming to the end of a fixed-rate mortgage over the next two years will pay around £45 more per month.

That compares with borrowers who refinanced between late 2022 and the end of 2024, when average repayments increased by around £120 per month.

However, not everyone will see only a small increase.

Around 750,000 homeowners currently paying mortgage rates below 3% are due to come off those deals this year. For this group, the Bank expects repayments to rise by an average of £170 per month.

Why have expectations changed?

Before the recent conflict involving Iran, the outlook had been more positive.

More than 2 million borrowers with two-year fixed-rate mortgages ending before the close of 2028 had been expected to remortgage at similar rates, with some even seeing their monthly repayments fall.

That picture has now changed.

The conflict pushed up oil and gas prices after the closure of the Strait of Hormuz, increasing concerns about inflation and reducing expectations of further interest rate cuts. Mortgage lenders have reflected those higher funding costs in the rates they offer borrowers.

Most homeowners are protected... for now

More than eight in ten mortgage holders are currently on fixed-rate deals, typically lasting two or five years.

That means their monthly repayments won't change until their current deal comes to an end.

The challenge comes when it's time to remortgage.

For some households, even a relatively modest increase in monthly repayments can make a noticeable difference to the household budget.

A practical view

No one can predict exactly where mortgage rates will be in the next year or two, but this is a reminder that borrowing costs can change quickly when wider economic events unfold.

If your fixed-rate mortgage is due to end over the next 12 to 18 months, it's worth reviewing your finances early rather than waiting until the last minute.

Having time to understand your options can make budgeting much easier if repayments are likely to increase.

Final thought

The latest forecasts suggest that mortgage costs are likely to remain under pressure for many homeowners over the coming years.

While the increases are expected to be less severe than those experienced during the recent interest rate rises, they could still have a meaningful impact on household finances.

Planning ahead, reviewing your budget and understanding your options before your current deal expires can help avoid unnecessary surprises.

If you'd like to discuss how rising mortgage costs fit into your wider financial plans, feel free to get in touch.