Homeowners have been warned they face a mortgage “ticking time bomb” with thousands to see their interest rate payments double each month, new research claims.
Analysis from the Liberal Democrats alleges mortgage borrowers will be hit by the biggest hike in interest payments on record.
The Lib Dems calculate that someone with an outstanding mortgage of £236,000 would see their monthly interest payments double from £236 to £474.
This would mean homeowners face paying £2,851 extra a year, according to the analysis.
The Lib Dems say these figures are based on a forecast in the Office for Budget Responsibility (OBR) documents, detailing that mortgage interest payments will rise by 100.5% in the year to September 2023.
This outstrips the previous record 63.6% rise in 1989, they claim.
Liberal Democrat Treasury spokesperson Sarah Olney said: “Homeowners are paying the price for the Conservative Government crashing the economy.
“The mortgage ticking time bomb has only seconds left. The coming months will see mortgage payments implode, leaving families paying hundreds of pounds more a month.
“This is simply unmanageable with the tax rises announced by the Chancellor. This was the cost of chaos budget where everyone pays the price.
“It is becoming clearer by the day that families who own a home will pay the ultimate price for months of chaos. Something has to give.”
Why are mortgage payments rising?
Interest rates have been steadily rising over the past year and this has an impact on variable rate mortgages.
The base rate, which is set by the Bank of England, is now 3% - this is compared to the 0.1% figure it stood at in December last year.
If you're on a tracker mortgage, these types of deals move in line with the base rate - so when interest rates rise, your monthly payments will go up.
If you're on a standard variable rate (SVR) mortgage, then you'll likely see your rates go up as well when the base rate increases.
It is down to your lender to decide whether to pass on the increase - and unsurprisingly, most do decide to do this.
If you’re on a fixed-rate mortgage, the rate rise won’t affect your monthly bill until your current deal expires.
This means you're protected for now - but many who locked into their mortgage deal when rates were cheap will be in for a nasty shock when they come to remortgage, due to how much rates have risen.
The Bank of England is raising interest rates to try and cool soaring inflation, which is currently at a 41-year-high of 11.1%.
