The Bank of England has warned that around one million people taking mortgage loans will face a £500 increase in their monthly payments until 2026.
The bank indicated, in a report, that mortgage borrowers “may face difficulties in paying their due installments,” but stressed the ability of banks to deal with the volume of defaulters.
The average fixed interest rate for two years on mortgage loans was about 6.7%, which is its highest level since the large increase in interest rates that occurred after the announcement of the state budget under former Prime Minister Liz Trace last September.
The increase in interest rates came against the backdrop of the Bank of England’s announcement of an increase in interest rates last June to the level of 5%, which is the highest level in fifteen years, which prompted major banks dealing in the mortgage market to increase interest rates on fixed-interest loans for a period of two years. and five years.
The average fixed interest rate for a period of five years on mortgage loans was about 3% about a year ago, which means that they have increased by almost more than double, which puts more pressure on the demand for real estate purchases, which led to a gradual decline in their prices since the beginning of the year. current.
It is noteworthy that the Bank of England has been forced to raise interest rates 13 consecutive times since December 2021, with inflation reaching 11% in the first half of this year, before it fell at a less than expected pace to 8.7% last month.
The British government is seeking to avoid a huge mortgage crisis, as the Treasury called on the heads of major banks dealing in the mortgage loan market to provide facilities for those who face difficulties in paying monthly installments to avoid millions failing to pay monthly installments, ruling out providing financial support to defaulters in paying installments, for fear that This causes inflation to rise again.
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