Home > News > UK mortgage rate rises ‘will put extra 400,000 people in poverty’

UK mortgage rate rises ‘will put extra 400,000 people in poverty’

Higher monthly home loan costs will pull another 400,000 people into poverty in the coming year as the fallout from dearer mortgage rates ricochets through the housing market.

The Joseph Rowntree Foundation (JRF) said an extra 120,000 households in the UK, the equivalent of 400,000 people, will be plunged into poverty when their current mortgage deal ends.

The analysis assumes that mortgage rates remain high and homeowners are forced to move on to an interest rate of 5.5%. With a current norm of 2%, this change would mean spending 54% of their monthly income on housing costs, up from 38%. In cash terms, this equates to an average increase of £250, from £610 a month to £860 a month.

Mortgage rates have been rising because of this year’s Bank of England base rate rise but shot up after Kwasi Kwarteng’s disastrous mini-budget and have remained high.

The warning comes after the Bank of England pushed the borrowing cost to 3% in the biggest single interest rate rise since 1989. However, the impact on the mortgage market was muted as lenders had already priced in a chunky rate rise, with some actually trimming their rates amid calmer financial markets.

On Friday, the cost of an average two-year fix stood at 6.45%, while an average five-year deal was 6.28%, according to the data firm Moneyfacts. Just more than a year ago, it was possible for mortgage borrowers to lock into an interest rate of less than 1% for two or five years.

People on low incomes with mortgages are already under extreme financial pressure as rising food, fuel and energy costs stretch household budgets to the limit. JRF says 750,000 households, or 2.4 million people, with a mortgage, are already in poverty.

The turmoil in the mortgage market would increase competition for rental properties and could result in rents for new lets rising sharply as buy-to-let landlords pass on their higher loan costs, the anti-poverty charity said.

Even if the housing market returns to “normal”, in which mortgage rates fall back to below 3%, and house prices are steady, lending criteria could be stricter, making it more difficult for first-time buyers to get on the property ladder, it said.

HICH LTD has continually raised the quality standards in the UK property survey market. Our multi-award-winning property survey service has made us the leading reference in the property survey market.

We offer property survey services of the highest quality. Using state-of-the-art equipment, we provide top-notch property surveys at affordable prices. Our prices are based on the number of rooms rather than the value of the properties, so you will always get the best value for money with our services.

Please look at our Trustpilot page and see why customers have chosen us as their favourite property survey provider!

At HICH LTD, we work to serve our clients and make the world a better place for everyone. We actively collaborate with NGOs to promote environmental, social and charitable causes. If you want to know more about our efforts or how you can help, contact us at hichinfo@aol.co.uk.

HICH LTD extends a warm invitation to contractors and service providers throughout the UK to join our network; by joining the Contractors and Service Providers Network, you will enjoy benefits such as a significant increase in customer flow, advertising on our high-traffic website, and direct contact with thousands of customers in your zip area. Find more information here or by following the QR code in the following video.