The impact of the Iran war means a million more homeowners face higher mortgage bills than the Bank of England had previously expected.
Just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028, according to Bank forecasts.
That compared to four million projected by the Bank in December.
However, the Bank’s Financial Stability Report said the hit would not be as hard as seen in recent years.
A typical owner-occupier rolling off a fixed rate in the next two years is likely to face an increase of £45 on their monthly mortgage bill, the Bank said. That compares to a typical rise of £120 for those getting a new deal between the end of 2022 and end of 2024.
However, 750,000 homeowners who are paying less than 3% interest on their current deal would be rolling off these products this year and would see an average increase of £170 per month in repayments, the Bank said.
More than eight in 10 mortgage customers have fixed-rate deals.
The interest rate on this kind of mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it.
More than two million borrowers on a two-year fixed deal expiring by the end of 2028 were projected to remortgage close to their existing rate and see little change in repayments, the Bank said.
However, these borrowers were now unlikely to see repayments fall over coming years, as had been forecast prior to the Iran conflict.