The Bank of England's Financial Stability Report, published on 7 July 2026, forecasts that just over five million UK homeowners will experience higher mortgage repayments by the end of 2028, according to the Bank's projections. This marks an increase of one million compared to the four million homeowners the Bank had projected in December 2025. The revision is attributed to the impact of the Iran war on the economic outlook, the report stated.
Mortgage Cost Increase Details
The Bank estimated that a typical owner-occupier rolling off a fixed-rate mortgage in the next two years will face a monthly increase of £45. This is significantly lower than the £120 average monthly rise faced by homeowners who secured new deals between the end of 2022 and the end of 2024. More than eight in ten UK mortgage customers hold fixed-rate deals, meaning their payments do not change until the deal expires, typically after two or five years.
| Metric | Previous Forecast (Dec 2025) | Current Forecast (Jul 2026) |
|---|---|---|
| Homeowners affected by end-2028 | 4 million | 5 million+ |
| Typical monthly increase (next 2 years) | — | £45 |
| Typical increase (2022-2024 refinancing) | — | £120 |
Household Financial Resilience
Despite the rising number of affected households, the Bank's report indicated that overall household finances remain resilient. It stated that household debt remains low relative to historical averages. The report added: 'They spend a larger share of their income on essentials, limiting their ability to adjust spending in response to higher prices,' referring to lower-income households, including renters, who are more exposed to higher energy prices. However, the Bank concluded that debt is unlikely to lead to sharp reductions in consumer buying. The report described household finances as resilient 'even in a challenging external environment'.
Trade and Macroeconomic Implications
For finance executives and treasury professionals monitoring UK trade flows, the subdued impact on consumer spending suggests that domestic demand for imports may not contract sharply, despite higher mortgage costs. The Bank's assessment that debt service burdens are manageable implies that the UK's import demand—a key component of trade finance—could hold up better than in previous tightening cycles. However, the report singled out lower-income households as more exposed to energy prices, which could affect spending patterns on discretionary goods, many of which are imported.
AI and Cyber Risk Warnings
Separately, the Financial Stability Report highlighted risks from rapid advances in artificial intelligence. The Bank said that rapid advances in AI have led to heightened risks over cyber attacks. It also noted that valuations of AI stocks have become 'more stretched' amid concerns of a bubble, repeating a similar warning issued in December 2025.
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