MILLIONS of households are predicted to see their annual mortgage payments rise by an average of £5,100 between now and the end of 2024, according to a think tank.
Around £1,200 of the predicted increase will be higher interest rates cause by the mini-budget, the Resolution Foundation said.
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The number of mortgages on the market nosedived following the mini-budget.
Lenders have gradually been bringing back new deals but have priced their rates upwards.
The average two and five-year fixed mortgage rates on the market are at their highest levels since 2008, standing at 6.47% and 6.29% respectively.
On Friday, Money Facts counted 3,112 mortgage products available, compared with 3,961 on the day of the mini-budget.
The Resolution Foundation emphasised that its mortgage cost estimates are “very sensitive to fiscal, as well as monetary, policy developments in the months and years ahead”.
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.
By the end of 2024, 5.1 million mortgaged households – or nearly a fifth of households across Britain – will be spending more on their housing costs as a result of increases in mortgage rates since the third quarter of 2022, according to the research.
In total, mortgage payments are set to rise by £26 billion a year by the end of 2024, the Foundation said.
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The think tank also said that, although higher income households will face the biggest increases in mortgage costs in cash terms on average, it is lower income families with mortgages that face the biggest increase as a share of their income.
By early 2025, half of all mortgaged households will have seen higher mortgage costs absorb at least 5% of their net household income.
This includes around two million households who will have lost at least 10% of their household income, according to the projections.
Some households may be able to avoid higher costs by, for example, using savings to reduce their mortgage balance, or by downsizing to a less expensive home.
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.
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.”
