Geopolitical tensions, reduced cooperation on trade and international policy and pressures on UK government debt levels “remain material,” says the Bank’s latest Financial Stability report.

It adds: “Long-term government borrowing costs in the UK and US have increased following the UK budget and US election. Monetary policymakers have continued to cut interest rates, and market participants expect them to continue to do so.

“Despite some sharp movements in prices around events in October and November such as the UK budget and the US election, core markets have continued to work smoothly.”

The Bank adds that while many UK households, including renters, still face cost-of-living pressures and higher interest rates, “the share of households who are behind in paying their mortgages is low by historical standards.

“And the share of households spending a high proportion of their income on mortgage payments is expected to remain low.”

The report comes after the central bank this year introduced its first base rate cuts in four years, in August and November, collectively bringing the interest rate down by 0.5% to 4.75%.

Also, wage growth, although slowing, remains above inflation at 2.3%.

Average pay lifted by 4.8% between July to September this year, lower than April to June 2022, when it was 4.7%, reported the latest Office for National Statistics data.

However, the Bank of England report points out that around half of the country’s 8.8 million mortgage holders “are likely to experience greater borrowing costs over the next three years as they refinance onto higher rates”, while “around a quarter of borrowers are expected to benefit from lower rates”.

It forecasts that from now until the end of 2027, around 50% of mortgage accounts will refinance onto higher rates.

Of these, 2.7 million will move onto a rate above 3% for the first time and roughly 420,000, or 5% of all mortgages, will see payments increase by more than £500 a month.

For other borrowers, previous and expected falls in Bank rate will lead to a fall in mortgage payments.

It says 27%, or 2.4 million mortgage holders, will see monthly payments fall by the end of 2027.

The survey says: “On balance, for the typical owner-occupier mortgagor rolling off a fixed rate in the next two years, their monthly mortgage repayments are projected to increase by around £146, up 22%, compared to £180, up 28%”, which the Bank had previously forecast in its June Financial Stability report.

The survey points out that in October, mortgage rates fell to their lowest values since September 2022.

It adds that although quoted mortgage rates have risen in recent weeks, “they remain slightly lower” than at the time of its June report.

It says that currently a two-year and five-year fixed rate 75% loan to value mortgages are now around 4.4% and 4.2%, respectively.

This has seen mortgage approvals rise “towards pre-pandemic levels”, while house prices have also continued to rise since its June survey.

It adds that the share of new mortgages for first-time buyers hit 52% in the third quarter of this year, up from 44% in 2013 “and near its highest point since at least 2005”.

The report points out that mortgage arrears have remained low at 1.1%, “and are expected to remain well below their early 1990s and post-global financial crisis peaks”.

Broadstone director of risk Tom Cuppello says: “The economy remains in a fragile condition with confidence dented following a bruising Budget, but any evidence of further recovery will help support green shoots of optimism.

“Nevertheless, as we head into 2025, lenders will need to act cautiously and tread a fine line.

“For example, the Bank of England notes that over a third, or 37%, of fixed rate mortgage accounts are still yet to fall off those favourable rates since drastic increases in the cost of borrowing started in the second half of 2021.

“However, falling rates could help many of those who have transferred onto more expensive mortgages lower their monthly repayment costs and free up more income.”