More than 5 million UK households will see their annual mortgage payments increase by an average of £5,100 by the end of 2024, amid high inflation and a “small” Budget.
More than 1 million households with variable-rate mortgages have faced higher repayments following the prime minister’s financial statement last month.
However, that number is expected to grow to 1.7 million by the end of the year, as people using fixed-rate offers switch to new deals, according to research released by the Resolution Foundation. on Saturday.
By the end of 2024, 5.1 million households – about a fifth of the total – will pay more on their mortgages than they do today.
Affected households will typically pay an additional £5,100 a year by the end of 2024, which is up to £26 billion more in additional mortgage payments, the team said.
While a large part of the expected increase in mortgage payments is the result of an increase Bank of England policy rate, £1,200 is due to changes in interest rate expectations under the “Small” Budget, according to the study.
Lindsay Judge, research director at the Resolution Foundation and an author of the report, said the rate hike “will cause a new decline in living standards for mortgage households across the UK”.
Affected London households will see the biggest increase – with the average payment set to increase by £8,000 in the same period, more than twice the £3,400 increase seen by mortgage parties in Wales have to go through.
However, the impact in the capital will be more concentrated as only 19% of households have a mortgage, the lowest of any region and much lower than the 29% in the Southeast.
While higher-income households will, on average, face the largest increase in the cost of a cash mortgage, lower-income households face the largest increase. in terms of income.
The research organization estimates that the typical household with a mortgage will spend about 5% more of their income on housing costs by the end of 2024. However, this figure rises to 10% for those with a mortgage. people with lower wages.
With inflation at a 40-year high, the Bank of England raised its policy rate from a historic low of 0.1% last year to 2.25%.
Meanwhile, markets are pricing in a 75 or 100 basis point increase at the BoE’s next policy meeting in November, with the rate expected to rise to more than 5% early next year.
Policy interest rate expectations for next year have increased by about 2 percentage points in response to the unrefundable tax cut announced by the government on September 23.
Even after the government Turn the corporate tax cut back on on Friday, expectations for the 2023 policy rate remained above 5% and much higher than mid-September.
The research organization forecasts that mortgage rates will rise to between 6 and 7% for fixed rates, rising to more than 8% for floating rates.
Analysis shows that one in three Conservative voters has a mortgage. For Labor voters and those in the “red wall” constituencies in the north and Midlands, won by the Tories in the last general election, the share rises to two in five .
