Home owners could be paying nearly £5,000 extra a year for mortgages as interest rates on loans head towards seven per cent.
That will double this year’s projections for repossessions to 24,000 by 2024 according to an economic consultancy’s analysis of latest Bank of England figures.
Andrew Wishart of Capital Economics said: “The big risk is that the BoE can’t get inflation down and interest rates keep rising.
“Repossessions will come down the line in a year to 18 months.”
On Thursday the Bank of England announced the highest base rate rise in 27 years of 0.5% to 1.75% meaning an extra £52 a month on the average home loan - £198 more since last November.
But housing experts we spoke to think rates of between five and seven per cent are likely next year before falling again in 2024.
That means a £200,000 repayment mortgage over 25 years costing £1,002 a month now would go up an extra £168 a month or £2,016 a year at 5% and £412 a month or £4,944 a year at 7%.
That will increase the cost of loans on 850,000 properties with tracker mortgages, along with the 1.1 million on variable rates.
And one in three of the nine million borrowers on fixed deals will see them ending within the next two years.
Home owners will have to cope with price rises of 13% and job losses in a recession the BoE predicts to last for 15 months as unemployment goes above five per cent.
Stuart Powell of Ocean Mortgages said: “The UK economy is officially on red alert and there is sadly a lot of pain in the pipeline for potentially millions of people.”
The Nationwide building society says house prices rose again last month by 0.3% despite the cost of living crisis as buyers scrambled to beat interest rate hikes. That took the average cost of a home from £271,209 to £271,613.
Nicholas Finn of Garrington Property Finders said: “First-time buyers have been rushing to get on the property ladder for fear higher rates would sabotage them even if they did have the necessary deposit.
“But a recession next year changes everything.”
Nationwide chief economist Robert Gardner said: “The housing market has retained a surprising degree of momentum given the mounting pressures on household budgets.”
The advice to home buyers from the experts is to get a five year fixed term mortgage before they become more expensive or begin to disappear.
And the 1.8 million borrowers whose fixed rates expire over the next two years should pay exit fees and find another fixed deal pronto.
.The mortgage bombshell adds up to a double whammy as the energy price cap hits £3,359 in October and will now rise every 12 weeks instead of the current six months.
Lib Dem Treasury spokesperson Sarah Olney is calling for an Emergency Mortgage Support Fund to be set up to help those who cannot pay the bills and risk losing their homes.
She added: “The mortgage ticking time bomb could prove disastrous for families and pensioners facing unimaginable energy bills this winter.
“ Boris Johnson has clocked off and Liz Truss and Rishi Sunak are completely clueless on how to solve the cost of living crisis.”
Shadow chancellor Rachel Reeves said: “Conservatives have lost control of the economy with skyrocketing inflation while mortgage rates rise.
“ Labour would remove tax breaks subsidising oil and gas producers to help people now, including cutting VAT on energy bills.”
Graham Cox of SelfEmployedMortgageHub.com says the Foreign Secretary’s immediate tax cutting plans could help keep mortgage rates down.
He added: “Rishi Sunak’s proposal to continue piling on the economic misery with tax cuts years down the road reveals a man deeply out of touch.
“He hasn’t the remotest comprehension of just how tough things are becoming for people. Mortgage rates may well be lower under Liz Truss’s tax-cutting regime.”
But Mr Sunak said: “I won’t rush through premature tax cuts. That would stoke inflation and drive up interest rates, adding to people’s mortgage payments.”
Lewis Shaw of Shaw Financial Services added: ”There’s no evidence a tax cut would be inflationary.”
Ashley Thomas of Magni Finance said: “The best way to keep the mortgage payments down is to fix as soon as possible.
“The sooner you apply, the quicker you can lock into the rate.”
But Imogen Sporle of Finanze warned: “If tax cuts cause the predicted spike in mortgage rates to 7% this is going to make it more difficult for all types of borrowers.
“Interest rate increases will cause a crash in the housing market. Not only will it be harder for those remortgaging to borrow the amount needed but they could even be in negative equity.”
Sabrina Hall of Kind Financial Services said: “We have no idea when the peak of the interest rises will be so for now my advice is still to fix.”
Helen Morrissey of Hargreaves Lansdown added: “Overpaying your mortgage is also a good way of reducing the amount of interest you pay over the long term.
“But given the current climate this may be beyond many people’s budgets right now.”
Meanwhile, one in five children in key worker households are now living in poverty with the North East worst hit.
TUC boss Frances O’Grady said: “Key workers got us through the pandemic. The very least they deserve is to be able to provide for their families.”
And families are now being forced to use savings to make ends meet and the National Institute for Economic and Social Research says 5.3 million households will have none by 2024.
With petrol prices through the roof weekday cycling has increased 47% over the last five months and Richard Jewell of Northamptonshire is one who has made the switch.
He said: “A month ago something snapped and I placed my car on Autotrader, and within 2 days it was gone.
“Cycling saves money, is kinder to the environment, takes barely any longer than driving, and turns a mundane task into a mini adventure.”
Cycling UK’s Duncan Dollimore added: “Switching to cycling is a simple way to make ends meet during the cost of living crisis.”
There is also a knock on effect for women living in abusive relationships. Financial pressures can lead to more abuse and make it more difficult to leave.
Shanika Haynes of Stowe Family Law said: “Lack of access to money can be a significant barrier to a person’s ability to flee.”
How your monthly mortgage bill could go up
Source: TotallyMoney
