Christmas crunch for 170,000 homeowners hit by higher mortgages in December
Exclusive: More than 170,000 households will see their monthly payments jump by an average of £240 a month, or almost £3,000 a year
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Your support makes all the difference.More than 170,000 homeowners will be hit with higher bills this month as their fixed-term mortgages come to an end, The Independent can reveal.
In what Labour has called a “Christmas crunch”, the households will see their monthly payments jump by an average of £240 a month, or almost £3,000 a year, new analysis shows.
It comes as inflation remains at more than double the Bank of England’s two per cent target and hard-pressed families grapple with a spiralling tax burden.
Labour blamed the increase on 13 years of Conservative governments leading to “disastrous management of housing and mortgages”.
Shadow economic secretary Tulip Siddiq said: “This will be terrible news for families who are already struggling to pay for Christmas during the cost-of-living crisis.”
“The Tory Government’s disastrous management of housing and mortgages is still having very real consequences every single day for people across the country,” she added.
The analysis is based on Financial Conduct Authority data showing the number of households whose fixed-rate mortgages come to an end in December is 173,715.
Meanwhile the Bank of England has said anyone renewing their mortgage faces an average increase of £240 per month, or £2,880 a year.
Mortgage rates have soared since the Bank of England started putting up interest rates to curtail spiralling inflation.
The central bank pushed the rate, which affects the cost of borrowing products including mortgages, from 0.25 per cent at the start of 2022 to 5.25 per cent now. Part of the rise is blamed on former prime minister Liz Truss’s disastrous mini-budget last September, which spooked financial markets and pushed up borrowing costs.
On Thursday the Bank is expected to hold rates steady for the third time in a row, in a slight boost for mortgage holders.
But those who have not yet renewed fixed rate deals taken out when interest rates were low are still bracing for huge uplifts.
In the coming three years, almost five million UK homeowners are still set to see their mortgage repayments jump by hundreds of pounds, the Bank of England has said.
About half of mortgage holders have moved to a new fixed-rate deal since interest rates started rising in late 2021, amounting to more than five million households.
But a further five million homeowners are still due to face higher borrowing costs by the end of 2026, the Bank’s Financial Policy Committee (FPC) said in its latest stability report.
While the average mortgage holder will pay an additional £240 a month, around 500,000 households could experience a monthly increase of more than £500 by the end of 2024.
The latest analysis also showed that the proportion of households’ incomes spent on mortgage payments is set to rise to 9 per cent by the end of 2026, from 6.8 per cent earlier this year.
The Bank of England’s meeting on Thursday comes after key economic data from the Office for National Statistics (ONS) this week also showed signs of cooling in the economy.
On Wednesday, the ONS said UK gross domestic product (GDP) fell 0.3 per cent in October, as the manufacturing and construction sectors were impacted by poor weather.
It came a day after the statistics body revealed that wage growth slowed at the fastest pace for two years.
The ONS said private sector regular earnings, excluding bonuses, rose by 7.3 per cent in the three months to October, down from 7.8 per cent in the previous three months, pointing towards weakening in the labour market.
Economists have increased their expectations for the interest rate cuts next year as a result.
Previously, the financial markets had priced in 0.75 percentage points of interest rate cuts in 2024, but on Wednesday they were expecting a 1 percentage point drop, which would take interest rates to 4.25 per cent by the end of 2024.
Nevertheless, experts are still expecting rates to remain steady in Thursday’s vote and in the early months of the New Year.
A Treasury spokesman said: “Inflation has halved, but we know some people are continuing to struggle, which is why we are committed to staying the course and getting it all way back down to 2 per cent. We are also helping households by providing £3,700 on average in cost of living support over the last three years, and our Mortgage Charter is giving extra protections against repossessions as well as making it easier to manage monthly repayments.
“Our Autumn Statement will deliver the largest boost to potential growth on record without fueling inflation, and we are cutting taxes for hard working people, saving the average employee £450 a year.”
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