"UK banks are in a strong position to support customers who are facing payment difficulties. This should mean lower defaults than in previous periods in which borrowers have been under pressure."
UK household finances are under pressure from higher borrowing costs, with a million mortgage holders set to face increases of between £200-£499 by the end of 2023, according to a new report from the Bank of England.
In its latest Financial Stability Report, the Bank warned that mortgage holders "may struggle with repayments" on loans.
Its data shows that two million mortgage holders will see smaller increases of up to £199 by the end of this year.
By the end of 2026, the Bank predicts that over three million will see monthly mortgage costs rise by up to £199, with over two million seeing rises of up to £499 and a million households facing increases of more than £500.
This week, the average rate on a two-year fixed rate mortgage hit a 15-year high of 6.66%.
Although the proportion of income that UK households overall spend on mortgage payments is expected to rise, the Bank of England says it "should remain below the peaks experienced in the Global Financial Crisis and in the early 1990s".
It added: "UK banks are in a strong position to support customers who are facing payment difficulties. This should mean lower defaults than in previous periods in which borrowers have been under pressure. In 2014, the FPC introduced rules which have also helped to limit the build-up of risk in the mortgage market."
