Mortgage borrowers face biggest rise in interest payments since financial crisis
British mortgage owners face the biggest hike in interest payments since the financial crisis, the Liberal Democrats can reveal.
Buried in the Office for Budget Responsibility's Spring Statement documents is a stark forecast showing that mortgage interest payments are set to rise by 42% by the fourth quarter of 2022, compared to the previous year. Mortgage interest payments are then set to rise by another 18.6% by the end of 2023. This will mean a combined rise of a staggering 68% in mortgage interest payments over the next two years.
The unprecedented increase could see mortgage owners hit with eye-watering bills. Analysis by the Liberal Democrats shows that a typical mortgage holder on a standard variable rate of 3.24% will see their monthly mortgage payments go up by £287 a month, or £3,444 a year, by the end of 2023.
Household debt servicing costs, the total interest people pay on their loans including mortgages and credit cards, is also set to increase from £55 billion in 2021/22 to a staggering £83 billion in 2023/24. This is a rise of 52% over the next two years, equivalent to increased interest payments of £1,000 per household.
The Liberal Democrats have warned the rise is the biggest threat to homeowners since the 2008 financial crisis - and could see families struggling to make ends meet with tax hikes, spiralling inflation and mortgage costs all hitting at the same time.
Leader of the Liberal Democrats Ed Davey MP said:
"This Conservative Chancellor has created the perfect storm. Enough is enough, it is time to scrap the tax hikes, solve the cost of living crisis and defuse this ticking mortgage timebomb.
"British homeowners face the toxic cocktail of interest rate rises, tax hikes and spiralling bills.
"Families need help, not tax rises. What on earth is this Government playing at? Rishi Sunak needs to get a grip and slash taxes now before people lose their homes.
"This ghastly forecast should send a shiver down the spine of all homeowners, especially first time buyers who have scrimped and saved to get on the ladder."
Story first reported by The Telegraph here.
Figures are taken from the OBR economy supplementary tables (tables 1.7 on mortgage interest payments and 1.19 on household debt servicing costs).
The average mortgage borrower on a variable rate mortgage had an interest rate 3.24% in December 2021, according to the Bank of England. A borrower with an average-price house (£274,000) and a 25-year, 80% Loan to value (LTV) on a 3.32% interest rate mortgage would see their monthly interest payment rise by 68% from £421 a month to £708 a month by the end of 2023. That is an extra £287 a month or £3,444 a year.
Total household debt servicing costs are forecast to rise from £55bn in 2021-22 to £83bn in 2023-24. Based on the latest ONS estimate of 28.1 million households in the UK, this means a rise from £1,947 per household to £2,956 - an increase of £1,009.