Close to four million homeowners still face vast increases in their mortgage bills despite interest rates nearing their peak, a think tank has warned.
The Bank of England raised interest rates to 4.5pc this week – their highest level since the financial crisis 15 years ago – and said it expected inflation to fall sharply by the end of the year.
Inflation is forecast to drop from 10.1pc to around 5pc in the final quarter of 2023 and remain above the Bank’s 2pc target until 2025.
Despite this, millions of borrowers still fixed onto cheap mortgage deals face bill increases, as they are forced to refinance at a time when rates are still high.
Simon Pittaway, senior economist at the Resolution Foundation, said: “While interest rate rises might be coming to an end, there will be plenty more mortgage pain.
“Two thirds of the £12 billion a year increase in mortgage costs that British households face as a result of rising rates is still to come.”
He said young families and low-and-middle income households will face the biggest hits to their living standards.
Mortgage repayments for homeowners aged 18 to 34 will increase by 3.4pc of income – nearly double the 1.8pc increase for those aged 55 and up, the think tank found.
Annual mortgage bills have risen by an estimated £4.2bn since the Bank of England started raising rates in 2021.
Economists are divided in their forecasts but expect interest rates to peak at 4.75pc or 5pc in the autumn.
Market prices suggest mortgage rates will remain above 4pc until the end of 2026, impacting 7.5 million households, the Resolution Foundation said.
Half of these households – 3.75 million – have yet to feel the pain of higher mortgage repayments but will pay an extra £8bn in the coming years.
Their mortgage repayments will jump up as they come to the end of fixed-rate mortgage deals that were cheaper before interest rates started rising in December 2021, from lows of 0.1pc. Interest rates remained below 1pc during the previous decade.
Around 1.6 million homeowners are facing an average annual increase of £2,300 in their mortgage bills from 2023 to March 2024 as their fixed mortgage deals expire, costing them an extra £5bn.
The average two-year rate was 5.3pc on Thursday, according to the analyst comparison site Moneyfacts.
https://news.google.com/rss/articles/CBMiamh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9wZXJzb25hbC1iYW5raW5nL21vcnRnYWdlcy9mb3VyLW1pbGxpb24tdmFzdC1tb3J0Z2FnZS1iaWxsLXJpc2UtcmF0ZXMtcGVha2luZy_SAQA?oc=5
2023-05-13 05:00:00Z
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