Homeowners face the biggest increase in mortgage costs since the financial crisis, with the amount of interest they pay is expected to rise 13% in 2023, data from the government’s independent forecasting unit suggests.
Politicians and analysts grabbed a ‘buried’ table in a report released by the Office for Budget Responsibility (OBR) alongside the budget, which said mortgage interest payments were set for their biggest increase since at least 2008.
The Liberal Democrats said data showed households with an average mortgage of £ 211,000 could see their payments increase by more than £ 500 per year, while investment firm AJ Bell said some people with mortgages larger ones may have to pay more than £ 1,000 more. one year.
Interest rates are at an all-time low of 0.1%, but financial markets anticipated a rate hike at the Bank of England meeting next week, which could take the base rate to 0 , 25%, then an increase of 0.25 point in December. With two more 0.25% hikes slated for next year, that could take the base rate to 1% by the end of 2022.
Banks and building societies have already started to pull their cheapest mortgage deals off the market, with some brokers saying the price changes have come “deep” in the past few days.
The OBR figures for the expected year-over-year growth in mortgage interest payments – included in one of the report’s major supplemental tables – suggest homeowners need to prepare for a $ 5 increase. 6% of costs next year, rising to 13% in 2023 before dropping. at 5.4% in 2024.
The 13% figure is by far the highest in the table, which dates back to 2008 and projects to 2026. By comparison, this year is expected to see an average drop in mortgage interest costs of 2.5%, according to the company. ‘OBR. The data.
While the table does not go into detail on the precise meaning of these increases in pounds and pence, that hasn’t stopped commentators from asking calculators to figure out how households might be affected.
The Liberal Democrats were among the first to grab the numbers. They said they indicated that an average borrower on a standard variable rate of 3.26% would see their payments increase by more than £ 42 per month, or £ 510 over a year. For a 2% fixed rate home loan, the increase would be £ 25 per month, or £ 300 per year.
Sir Ed Davey, the leader of the Liberal Democrats, said: “This terrible forecast should thrill the Chancellor. “
AJ Bell said the data suggested those who signed a record two-year fixed-rate contract for two years earlier this year could face a big increase when they come to remortgage in the first half of 2023.
“Someone with a £ 250,000 loan who settled earlier this year and renewed in 2023 would see £ 600 a year added to their mortgage costs, while someone with a £ 450,000 loan would see their costs increase by £ 1,068 a year, ”said Laura Suter. , responsible for the firm’s personal finances.
She added that a person with a current average variable rate of 2.4% and who had a mortgage of £ 250,000 could see their annual costs increase by £ 696 by 2023, while those with £ 450,000 d borrowing costs would increase by £ 1,260 per year. .
Data from the banking sector shows that a large majority of borrowers (74%) are currently at fixed rates and are therefore protected against any immediate rate hikes.