British homeowners are facing the biggest hike in mortgage payments since the financial crisis, with interest rates already beginning to rise the day after Rishi Sunak’s Budget announcement, according to new analysis.
The average household on a standard variable-rate mortgage will pay £510 more per year in 2023 as interest rates rise, the Liberal Democrats found.
Halifax said on Thursday it would increase rates on several of its mortgage deals by 0.2 percentage points from 1 November, and Barclays announced a 0.35 percentage point hike. HSBC also said it would put up rates, while NatWest increased its rates by 0.1 percentage points.
The rise will mean a further squeeze on household finances, which are being hit with an estimated £3,000 per year in additional taxes as well as rising costs for essentials including energy and food.
Alongside the chancellor’s statement on Wednesday, the Office for Budget Responsibility (OBR) published its forecasts for the UK economy, including a prediction that rising inflation would prompt the Bank of England to raise its key benchmark interest rate from 0.1 per cent to 0.75 per cent by the end of 2023. Under the OBR’s worst-case scenario, rates would jump to 3.5 per cent.
The Liberal Democrats calculated that an average borrower currently paying 3.26 per cent on a variable mortgage would see their monthly payments go up by £42 a month, or £510 over a year. That would equate to a 13 per cent increase in their annual mortgage payments. A borrower on a fixed-rate mortgage of 2 per cent would pay £300 a year more.
The leader of the Liberal Democrats, Ed Davey, said: “This Conservative chancellor has created the perfect storm. This is now the worst time in a generation to be a homeowner.
“British homeowners face the toxic cocktail of interest-rate rises, house-price surges, and council-tax hikes just around the corner.
“This ghastly forecast should send a shiver down the chancellor’s spine. The way he brushed off the cost-of-living crisis in the Budget was careless and completely out of touch with the country. If he can’t get a grip on this cost-of-living crisis, how on earth is he going to cope with a mortgage crisis?
“People who work hard and play by the rules deserve a fair deal. Enough is enough: it is time to scrap the tax hikes, solve this cost-of-living crisis, and defuse this ticking mortgage timebomb.”