‘Living standards crunch’ as mortgage bills set to rise by an average £3,400 a year in Wales
Mortgage bills are set to rise by an average of £3,400 extra a year in Wales by the end of 2024, causing a “living standards crunch” according to a think tank.
The Resolution Foundation said that the number compares to an average of £5,100 across the nations of the UK.
Some £1,200 of the pan-UK average increase predicted reflects higher expectations of interest rate rises since the “mini-budget”, the Resolution Foundation said.
They said that despite Jeremy Hunt replacing Kwasi Kwarteng as Chancellor in a bid to tame the economic crisis, a “massive mortgage cost hike remains on the cards.”
“Higher interest rates will cause problems for a large number of households [and] have significant political ramifications,” they said.
Mortgage rates will stabilise at 6 per cent by 2027, after rising from 4.74 to 6.47 since the mini-budget over two weeks ago.
Huw Pill, the Bank of England’s chief economist, has predicted a “significant rise” to interest rates when they next meet.
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 said.
The Foundation said it also noted that a higher interest rates climate will create “winners” as well as “losers”, with higher rates potentially benefiting retired savers and those who are saving up to buy their first home.
The report added: “Regardless of how the future unfolds, it is fair to assume that higher interest rates will cause not only (often serious) problems for a very large number of households, but have significant political ramifications as well.”
The Foundation’s analysis also indicates that there was a smaller share of mortgaged households among Conservative voters in 2019 compared with Labour or SNP voters, at 33%, compared with 40% and 41% respectively.
The report added: “However, close to four in 10 voters in ‘red wall’ seats at the last election were mortgaged homeowners.”
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.
“Between now and the next election, Britain is on track for a £26 billion mortgage hike as over five 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.”
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