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More mortgage pain to come for homeowners, says think tank

13 May 2023 2 minute read
Photo: Tim Goode PA Images

There is more mortgage pain to come for the UK’s homeowners, many of whom are yet to feel the full impact of rising interest rates, according to a think tank.

The trend towards homeowners taking out longer fixed-rate mortgages has delayed the impact on some households, with two-thirds of the eventual £12 billion increase in annual mortgage costs still to be passed on, the Resolution Foundation said.

The Bank of England increased the base interest rate to 4.5% from 4.25% on Thursday – the 12th rise in a row since rates started going up in December 2021.

The average mortgage holder could see their monthly interest payments jump by around £200 a month if they fixed to a new rate this year, the Bank’s economists estimated.


Simon Pittaway, senior economist at the Resolution Foundation, said: “While interest rate rises might be coming to an end, there will be plenty more mortgage pain to come.”

Around four-fifths (81%) of outstanding residential mortgages in December 2022 were fixed-rate deals, according to UK Finance figures. This group will not feel the immediate impact of base rate rises until their deal ends.

The foundation said that, while the Bank’s rate-rising cycle has been sharp, the growing popularity of fixed-rate mortgages and longer-term deals means many borrowers are yet to see the impact on their mortgage outgoings.

Of the 7.5 million mortgagor households that will eventually be affected by the rate-rising cycle since the end of 2021, around half have yet to see a change in their mortgage rate, the foundation said.

It added that mortgage costs are expected to remain elevated for some time.

Richer households, which are more likely to be mortgaged than poorer homes and tend to be more expensive properties, will face the majority of the £12 billion rise in mortgage costs, the foundation said.

But it predicted that the scale of the living standards shock will be particularly high for those low and middle-income households who are affected.

Younger home-owning families, who tend to have lower incomes than older households and higher mortgages relative to incomes, will also face a sharp living standards hit, the foundation said.

The foundation is focused on improving living standards for people on low to middle incomes.

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1 year ago

I bet the greedy money-makers are waiting anxiously for repossessions to come available at bargain prices.

Steve Duggan
Steve Duggan
1 year ago

Have all these interest rate rises tackled inflation sufficiently? No. We have taken the hit while the real culprits like the profiteering energy companies and supermarkets get off lightly. Our inflation rate is now believed to be still high primarily down to what’s know as greed inflation – these companies rankings in higher profits at our expense. What a greedy country we live in these days. Wales could aim to do better on its own.

1 year ago

To me for a fresh approach. Rate rises have done nothing to help the average person one bit. Just hit us all.

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