Mortgage (home loan) interest rates in the UK are projected to increase rapidly, affecting 7.5 million households with an additional cost of £15.8 billion per year by 2026.
According to the analysis made by the British think tank Resolution Foundation, the forecast that the Bank of England (BoE) interest rate increase cycle will continue, with inflation being higher than expected in April and the increase in salaries strengthened.
With the expectation that policy rates, currently 4.50 percent, will reach 6 percent by mid-2024, interest rates for mortgages are also rising and market deals are being affected.
Average two-year fixed mortgage rates are projected to rise to 6.25% by the end of this year and not fall to 4.50% by the end of 2027.
It is calculated that these high rates will gradually deepen the current mortgage crisis in the country and bring an additional cost of £15.8 billion to total annual mortgage repayments by 2026.
Annual mortgage repayments per household are expected to increase by £2,900 by next year and 7.5 million households are expected to be affected by the higher rates.
In his assessment of the analysis, Simon Pittaway, Senior Economist at Resolution Foundation, stated that market expectations that interest rates will rise further and remain high for a long time, with the withdrawal of agreements from the market and replacing them with new high-rate agreements, had a major impact on the market, adding, “The mortgage crisis is currently costing mortgage payments to 15.8 billion dollars. The pound is on track to increase, and next year re-mortgage costs could rise by an average of £2,900 per household.” used the phrase.
On the other hand, noting that the increases may not be as bad as expected, Pittaway said, “However, about 60 percent of the 15.8 billion pounds increase has still not been passed on to households. Reflecting this increase, increased repayments, and the already deteriorating living standards of millions of households before the general elections will deal another blow. ” made the statement.