Many households remortgaging or taking out new mortgages since 2022 have experienced sharp falls in their disposable income as higher interest rates have pushed up housing costs, and by December 2023 this is set to have pushed 320,000 such people into poverty
However official data do not measure mortgage interest payments properly, so official poverty statistics will only capture about two-thirds of this effect
These are the findings of a new IFS report, released today
Sam Ray-Chaudhuri, a Research Economist at IFS and an author of the report, said:
‘Rising mortgage rates have played and are likely to continue to play an important role in many households’ living standards. But, perhaps surprisingly, they are not measured properly in the official income data. This has led to the headline statistics understating the number of people in poverty, something set to get worse in next year’s data. Poverty rises have also been understated due to the unequal impact of inflation. At a time when rates of deprivation and food insecurity have risen substantially, poverty statistics that hide the real scale of these increases risk policymakers missing what is truly happening to poverty.’
Peter Matejic Chief Analyst at the Joseph Rowntree Foundation who funded the report, said:
‘This research shows the cost-of-living crisis wasn’t felt equally by everyone. Compared with before the COVID pandemic, many more people, especially those on a lower income, struggled to heat their homes or keep up with their bills.
‘One reason lower-income households went without essentials is because they faced a rate of inflation even higher than the headline numbers. High interest rates also saw many households forced into financial hardship after they remortgaged.
‘This report raises many questions about whether social security is adequate for the challenges looming over struggling households. The new government can’t wait for growth, after years of cuts, caps and freezes to social security have left families without the financial resilience and security they needed to cope with higher prices and costs.’
