The Resolution Foundation predicts Britain is set for a £26 billion mortgage hike (Joe Giddens/PA)
(Picture: PA Archive)Average annual London mortgage payments are set to surge, a think-tank has warned.
Due to interest rates increases from the Bank of England, the Resolution Foundation says London households could see average annual payments rise by £8,000 between now and the end of 2024 - in comparison to £3,400 in Wales.
Across the country, the average annual mortgage bill is set to rise by an average of £5,100 for more than five million households.
Up to £1,200 of that increase is due to higher than expected interest rates since the “mini-Budget” promises of unfunded tax cuts, the Resolution Foundation said.
Lindsay Judge, the think-tank’s research boss, predicted misery for many. She said: “Between now and the next election, Britain is on track for a £26billion mortgage hike.”
She added: “The living standards pain from rising interest rates will be widespread.”
By early 2025, half of all mortgaged households, or 3.8 million, will see higher mortgage costs absorb at least five per cent of their net household income.
Around two million will lose at least 10 per cent.
Average two and five-year fixed deals are at their highest levels since 2008, standing at 6.47 and 6.29 per cent respectively.
The Resolution Foundation, which aims to help those on low-to-middle incomes, warned that its mortgage cost estimates are “very sensitive to future fiscal, as well as monetary, policy developments”.
Those on variable deals will feel the pinch now but because most are on fixed-rates, costs will build as they move on to new deals.
By the end of 2024, 5.1 million mortgaged households - nearly a fifth of families - will be spending more on their housing costs due to recent increases in rates, says the research.
In total, mortgage payments are set to rise by £26billion a year by the end of 2024, the foundation said.
Those with higher incomes face the biggest hit in cash terms but poorer families will see their loan take a far bigger share of their wages.
The foundation noted higher rates could benefit retired savers and those who are saving for their first home.
The report concluded: “It is fair to assume that higher interest rates will cause not only (often serious) problems for a very large number of households, but have significant political ramifications as well.”
