A million additional UK homeowners are projected to encounter elevated mortgage costs compared to Bank of England forecasts, primarily due to the geopolitical tensions stemming from the Iran conflict.

The Bank's Financial Stability Report indicates that over five million homeowners will experience increased monthly repayments by the end of 2028, surpassing the previous projection of four million.

While the financial impact is anticipated to be less severe than recent years, typical fixed-rate mortgage holders are expected to face a £45 monthly increase, significantly lower than the £120 rise seen between 2022 and 2024.However, those with interest rates below 3% may see an average £170 monthly hike.

The report highlights that over two million borrowers on expiring two-year fixed deals are likely to remortgage at near-current rates, though future repayment reductions are unlikely due to ongoing economic volatility.

The Iran conflict's closure of the Strait of Hormuz has driven up energy prices, prompting inflationary pressures and central bank rate hikes, which have translated into higher mortgage rates for first-time buyers and refinancers.The Bank also warns of escalating public debt risks, projecting UK debt to triple to nearly 300% of GDP by 2078 without intervention.

While lower-income households face greater exposure to energy price increases, the report notes overall household financial resilience despite these challenges.