Mortgage hell as a million households face paying extra £500 a month, Bank of England warns

Nearly a million Britons pay an extra £500 a month in mortgage costs, the Bank of England has admitted.

After raising interest rates 13 times in an effort to curb inflation, the Bank accepts households “may have difficulty repaying” for home loans.

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Its Governor Andrew Bailey says the recovery or default rate won’t be as bad as it was during the financial downturn of the 2008 or 1990s.

However, he said soaring costs of living and higher mortgage payments would put additional pressure on lower-income families.

The bank rate rose rapidly from 0.1 in December 2021 to a 15-year high of 5%.

Most households get a fixed-rate mortgage but will be shocked when their contract is about to be renewed.

The average household mortgage this year will face an increase of £220 a month.

The bank says about 650,000 people will spend at least 70% of their after-tax income and other utility bills on mortgages by the end of the year.

Around three million people will have to pay up to £500 more a month by the end of the year, while nearly a million people will have to pay at least £500 more by 2026.

Thousands face a minimum increase of £1,000.

The UK’s inflation rate, currently 8.7%, has so far remained much higher than elsewhere.