LONDON — One in five families in Britain will take a financial hit from having to pay more for their mortgages between now and 2024 with about a quarter of the increase caused by the recent market turmoil, a think-tank said on Saturday.
The Resolution Foundation, which focuses on issues facing lower-income households, said more than 5 million families will see their annual mortgage payments rise by an average of 5,100 pounds ($5,700.27) over the next two years.
Of that, 1,200 pounds reflected the expectations of higher interest rate rises since the Sept. 23 “mini-budget” that prompted a surge in borrowing costs with its unfunded tax cuts.
“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,” Lindsay Judge, research director at the Resolution Foundation, said.
The Bank of England has raised its benchmark borrowing rate from 0.1% last December to 2.25% now and is expected to announce another big increase on Nov. 3 followed by more which will take Bank Rate above 5%, according to bets in financial markets.
The BoE is trying to get a grip on inflation running at nearly 10% and economists say the tax cuts promised by Truss – even after her U-turn decision on Friday not to block an increase in corporation tax – will add to price pressures.
The Resolution Foundation said 1.2 million mortgage-holding households on variable rate deals would see their housing costs rise in with Bank Rate while 85% with fixed-rate deals would see their cost build more gradually. ($1 = 0.8947 pounds) (Reporting by Muvija M Writing by William Schomberg Editing by Andy Bruce)