Over 5 million families are set to see their annual mortgage payments rise by an average of £5,100 by the end of 2024, a think tank has warned.
While some homeowners on variable rate deals will see their costs increase immediately, the impact on the majority of mortgaged homeowners, who are on fixed-rate mortgages, will build over the coming years as they move off lower rates on to new deals, the Foundation warned.
By the end of 2024, around 5.1 million mortgaged households — or nearly a fifth of households across Britain — will be spending more on their housing costs as a result of increases in mortgage rates since the third quarter of 2022, according to the research.
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In total, mortgage payments are set to rise by £26bn a year by the end of 2024.
Households in London will see the biggest increase, with average payments set to rise by £8,000 over this period, more than twice the £3,400 increase experienced by mortgagor households in Wales.
The impact in London will be concentrated however, as fewer than one-in-five households (19%) in the capital have a mortgage.
The number of mortgages on the market nosedived following the mini-budget. Lenders have gradually been bringing back new deals but have priced their rates upwards.
On Friday, Moneyfacts.co.uk counted 3,112 mortgage products available, compared with 3,961 on the day of the mini-budget.
The average two- and five-year fixed mortgage rates on the market are at their highest levels since 2008, standing at 6.47% and 6.29% respectively.
Lindsay Judge, research director at the Resolution Foundation, said: “Households across Britain are currently living through an inflation-driven cost of living crisis as pay packets shrink and energy bills rise.
“The government has responded with policies such as the welcome Energy Price Guarantee. But the Bank of England is responding too by raising interest rates, which will benefit savers but cause a fresh living standards crunch for mortgaged households across Britain.”
In total 1.7 million households will see their mortgage payments rise later this year — including 500,000 households on new fixed rate deals — and a further 400,000 households will pay more in early 2023.
These higher housing costs will be stark, the think tank warned. The average mortgaged household, including those that are protected by their fixed rate mortgage, will see their annual mortgage payments rise by £3,500 between now and the end of next year.
“Between now and the next election, Britain is on track for a £26bn mortgage hike as over 5 million households see their annual mortgage payments rise by £5,100 on average.
“With almost half of all mortgagor households on course to see their family budgets fall by at least 5% from higher payments, the living standards pain from rising interest rates will be widespread,” Judge added.