Risks to the UK economy are rising, with half facing increased mortgage payments even as mortgage holders grapple with upward pressure on the cost of living, the Bank of England said.
The World Bank's latest financial stability report says geopolitical tensions, declining cooperation on trade and international policy, and pressure on UK government debt levels “remain significant”. 
It added: “Long-term government borrowing costs in the UK and US have increased following the UK Budget and US election. Monetary policy makers continue to cut interest rates and market participants expect them to continue.
“The core market continues to perform well despite sharp price fluctuations around events in October and November, such as the UK Budget and the US election.”
The Bank said that while many households in the UK, including renters, continue to face cost-of-living pressures and rising interest rates, “the proportion of households in arrears on their mortgage payments is low by historical standards.” he added.
“And the proportion of households spending a high proportion of their income on mortgage payments is expected to remain low.”
The report was released after the central bank introduced the first base rate cuts in four years in August and November this year, cutting interest rates by a combined 0.5 percentage point to 4.75%.
And while wage growth has slowed, it is still 2.3% above inflation.
Average wages rose by 4.8% between July and September this year, lower than the 4.7% rate from April to June 2022, according to the latest data from the Office for National Statistics.
However, a Bank of England report found that around half of the country's 8.8 million mortgage holders are “likely to experience higher borrowing costs over the next three years by refinancing to higher interest rates”, while “borrowers About a quarter of people can benefit from lower interest rates.
Between now and the end of 2027, we predict that approximately 50% of mortgage accounts will be refinanced to higher interest rates.
Of these, 2.7 million homes will move to interest rates above 3% for the first time, and around 420,000 homes, or 5% of all mortgages, will see their monthly payments rise by more than £500.
For other borrowers, historical and expected lower bank interest rates will mean lower mortgage payments.
It says 27%, or 2.4 million mortgage holders, will see their monthly repayments fall by the end of 2027.
The study states: “All told, the typical owner-occupier mortgage repayer who leaves fixed rate over the next two years will see their monthly mortgage repayments increase by around £146 compared to £180, an increase of 28%. , which is expected to increase by 22%, which the bank had previously forecast in its June Financial Stability Report.
The survey notes that mortgage rates in October fell to their lowest since September 2022.
The report added that although quoted mortgage rates have increased in recent weeks, they “remain slightly lower” than at the time of the June report.
According to the report, the current mortgage-to-value ratios for two-year fixed rate 75% loans and five-year fixed rate 75% loans are approximately 4.4% and 4.2%, respectively.
This has seen mortgage approvals rise “toward pre-pandemic levels” and house prices have continued to rise since the June survey.
The proportion of new mortgages for first-time mortgage buyers reached 52% in the third quarter of this year, up from 44% in 2013 and “close to its highest point since at least 2005.” added.
The report notes that the mortgage delinquency rate remains low at 1.1% and is “expected to remain well below its peaks in the early 1990s and after the global financial crisis.”
Tom Cappello, director of risk at Broadstone, said: “While the economy remains fragile and confidence has been dented by the budgetary blow, further signs of recovery could provide some green light for optimism. This will help support the budding of the plants.”
“Still, lenders will need to tread carefully and walk a fine line as we head into 2025.
“For example, the Bank of England points out that more than a third of fixed rate mortgage accounts, or 37%, remain at favorable rates as borrowing costs began to rise significantly in the second half of 2021. There is.
“However, lower interest rates could help reduce monthly repayment costs and secure more income for many people who switch to more expensive mortgages.”
