Rishi Sunak has been warned homeowners face a “serious shock” as the Bank of England prepares to hike interest rates for the 13th time in a row, piling more pressure on struggling mortgage holders.
The Institute of Fiscal Studies (IFS) said 1.4m homeowners – half of whom are under 40 – will see a fifth of their disposable income wiped out by soaring mortgage rates, while trade body UK Finance said it expects 98,500 borrowers to fall behind on payments this year.
Today the central bank is expected to increase the so-called base rate from 4.5 per cent to at least 4.75 per cent, and possibly as high as 5 per cent. The predicted rate rise comes after a shock inflation reading yesterday showed the rate at which prices are rising flatlined in May at 8.7 per cent, instead of an expected fall.
The predicted interest rate change – aimed at bringing spiralling inflation under control – will add further pressure to the bank accounts of millions of homeowners through higher monthly mortgage payments. The average rate on a two-year deal has already shot up to 6.15 per cent, Moneyfacts figures showed yesterday – almost triple the level seen last March.
Influential think tank the IFS warns that the average mortgage holder will be £3,360 worse off a year, or £280 a month, because of the increases, wiping out around a 10th of their disposable income.
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