Mortgage bills in London could ‘rise by £8,000 a year’, think tank warns
Average annual mortgage payments in London are set to rise, a think tank has warned.
Due to the Bank of England’s interest rate hike, the Resolution Foundation says London households could see their average annual payments rise by £8,000 by the end of 2024, from £3,400 at the end of 2024. Wales.
Across the country, the average annual mortgage bill is expected to rise by an average of £5,100 for more than five million households.
Up to £1,200 of that increase is due to higher than expected interest rates since ‘mini budget’ promises of unfunded tax cuts, the Resolution Foundation said.
Lindsay Judge, the think tank’s head of research, predicted misery for many. She said: ‘Between now and the next election, Britain is on track for a £26billion mortgage hike.
She added: “The pain in living standards from rising interest rates will be widespread.”
By early 2025, half of all mortgaged households, or 3.8 million, will see higher mortgage costs eat up at least 5% of their net household income.
About two million will lose at least 10 percent.
The average two- and five-year fixed transactions are at their highest level since 2008, standing at 6.47 and 6.29 percent, respectively.
The Resolution Foundation, which aims to help people on low to middle incomes, warned that its mortgage cost estimates are “very sensitive to future developments in fiscal, as well as monetary, policy”.
Those with variable offers will feel the pinch now, but since most are fixed rates, costs will increase as they move to new offers.
By the end of 2024, 5.1 million mortgaged households – almost a fifth of families – will spend more on housing costs due to recent rate increases, according to the research.
In total, mortgage payments are expected to rise by £26bn a year by the end of 2024, the foundation said.
Those with higher incomes are the most affected in terms of cash flow, but poorer families will see their loan take a much larger share of their salary.
The foundation noted that higher rates could benefit retired savers and those saving for their first home.
The report concludes: “It is fair to assume that higher interest rates will not only cause (often serious) problems for very large numbers of households, but will also have significant political ramifications.