Soaring interest rates to cost UK mortgage holders £12bn in extra payments
Soaring interest rates will cost UK mortgage holders £12bn in extra payments, according to a leading thinktank which said the impact will be felt mostly by young families.
In a report that emphasised the dramatic impact of higher borrowing costs, the Resolution Foundation said the Bank of England’s 12 consecutive rates rises since December 2021 had already cost homeowners £4.2bn, with about £8bn more in extra payments likely over the next couple of years.
More than 1.6 million homeowners are expected to re-finance the fixed rate loans this year, forcing them to pay an average £2,300 extra a year in interest payments.
In the first estimate of the overall cost, the foundation said 3.8m households have shifted to a higher mortgage rate since 2021, either because they were on a variable or tracker mortgage, or because they were one of the 35% of households with a fixed rate product that expired before March this year.
The remaining half – 3.7m households – had not seen their rate change up to March but most will need collectively to find an extra £5bn by next summer when their fixed rates expire.
Richer households with expensive houses and large loans will pay the bulk of the extra cost. “However, the scale of the living standards shock will be greatest for those low-and-middle income households who are affected,” the foundation said.
Repayments will increase by more than 4% of income for mortgage payers in the bottom 20% to 40% income group, compared with just 2% for those in the top 20%.
Earlier this week, the Bank of England’s monetary policy committee (MPC) hiked interest rates by 0.25 percentage points to 4.5% to quell an inflation rate that reached 10.1% in March.
Some analysts have argued that a combination of higher personal
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