Interest rate hikes could see 1.4 million people lose 20% of their disposable income to rising mortgage payments, with mortgage holders in their 30s and in London hit hardest.
According to a study released today by the Institute for Fiscal Studies,over 14 million adults have a mortgage. Many with fixed rate mortgages are shielded from rate rises, but when these end they will be exposed to much higher rates.
Around a quarter of mortgages will come off a fixed term deal between between the end of last year and the end of 2023
So far, since March 2022 the average two-year fixed rate mortgage has risen from 2.65% to 6%.
If rates remain this high, mortgage holders will see their mortgage payments rise on average by £280 per month, at a time that families are already under financial strain.
Those in their 30s will see the biggest increases to their monthly mortgage payments, paying almost £360 more on average – a 11% hit to their disposable incomes.
1.4 million mortgage holders, half of which are under 40, will see their disposable incomes fall by over 20%.
8.5 million people, around 60% of mortgage holders, will end up paying more than a fifth of their family income on mortgage payments if interest rates remain at 6%.
This is substantially higher than in 2008 when rates were at their previous high.
Renters have also seen large increases in their housing costs, and have historically paid more than mortgage holders.
But compared to renters, there is not much of a safety net in the benefit system for low income mortgage holders.
“Given the cost of living pressures people are already facing due to high food and energy price inflation, these significant increases in mortgage costs could not come at a worse time.” says the Think Tank
