Half of UK mortgage holders could see their payments increase over the next three years, the Bank of England has said.

It estimates that about 4.4 million mortgages are expected to see payments rise by 2027, including £500-per-month hikes for around 420,000 households.

However, about a quarter of borrowers are set to see payments fall, and the Bank said households were better equipped to cope with mortgage repayments than predicted earlier this year.

The Bank also warned that global risks to the economy have been rising, stating wars, trade tension, cyber attacks and geopolitical tensions pose “significant” risks to broader financial stability.

In its latest Financial Stability Report, the Bank said household finances had remained resilient in general.

“While many UK households, including renters, are still facing pressures from the increased cost of living and higher interest rates, the share of households who are behind in paying their mortgages is low by historical standards,” it said.

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

The Bank of England started to increase interest rates in late 2021 and after a series of rises, rates finally started to fall earlier this year.

The Bank predicts about 2.7 million homeowners will refinance onto a mortgage rate of over 3% for the first time before the end of 2027.

It says a typical owner-occupier coming off a fixed rate in the next two years will see their monthly mortgage repayments increase by around £146.

However, that is a smaller amount than it estimated at its last report in June, reflecting lower mortgage rates and the fact that more households are choosing to borrow over longer terms.

Also, while half of mortgage holders are set to see payments rise by 2027, 23% will see no change and 27% will see payments fall.

The Bank stressed that UK lenders remain in a strong position to support households and businesses, even if the economic risk environment worsens.

Looking at the global picture, the Bank said “uncertainty around, and risks to, the global economic outlook have increased”.

Geopolitical risks remain high with Russia’s war in Ukraine continuing and the conflict in the Middle East.

The Bank noted that following recent elections, “a range of macroeconomic and financial policies may change under newly-elected governments”.

It did not specifically mention US President-elect Donald Trump’s plans to put import tariffs on goods from Canada, Mexico and China, but noted the “potential to increased global fragmentation” of trade.

This fragmentation “poses risks to UK financial stability”, the Bank said.

“A reduction in the degree of international policy cooperation could hinder progress by authorities in improving the resilience of the financial system and its ability to absorb future shocks,” it added.

The Bank also acknowledged that the cost of borrowing for the UK government – as measured through bond yields – had risen since last month’s Budget.

However, it added that “markets have continued to work smoothly”.