2021 – Homeowners face the biggest surge in mortgage costs since 2008 | Mortgages

Homeowners face the sharpest spike in mortgage costs since the financial crisis, with the amount of interest they pay rising 13% in 2023, data from the government’s independent forecasting unit suggests.

Politicians and analysts confiscated a table that was “buried” in an OBR report published alongside the budget, which stated that mortgage interest payments were expected to see their largest increase since at least 2008.

The Liberal Democrats said the data showed households with an average mortgage of £ 211,000 could increase their payments by more than £ 500 a year, while investment firm AJ Bell said some people with larger mortgages would have to pay an additional £ 1,000 an additional one Year.

Interest rates are at an all-time low of 0.1%, but financial markets priced in a rate hike at next week’s Bank of England meeting, which will raise the key rate to 0.25% and then increase 0.25 points in December could. Since two further increases of 0.25% are forecast for next year, the key rate could rise to 1% by the end of 2022.

Banks and building societies have already begun pulling their cheapest mortgage offers from the market, with some brokers saying the price changes in the past few days have come “thick and fast”.

The OBR numbers for projected year-over-year growth in mortgage interest payments – included in one of the supplementary tables in the main report – suggest that homeowners can expect costs to increase by 5.6% over the next year, starting in 2023 13% before falling back to 5.4% in 2024.

The value of 13% is by far the highest in the table, which goes back to 2008 and extends to 2026. For comparison: According to OBR. the cost of mortgage interest falls on average by 2.5% data.

While the table did not elaborate on the significance of these pound and pence increases, that didn’t stop commentators from getting the calculators to figure out how households might be affected.

The Liberal Democrats were among the first to take up the numbers. They said the average borrower with a standard floating rate of 3.26% would increase their payments by more than £ 42 per month, or £ 510 per year. For a 2% fixed rate home loan, the increase would be £ 25 per month or £ 300 per year.

Sir Ed Davey, leader of the Liberal Democrats, said: “This terrible prediction should send a chill down the spine of the Chancellor.”

AJ Bell said the data suggested those who signed a record-low two-year fixed rate contract earlier this year could see a big surge if they rescheduled in the first half of 2023.

“Someone with a £ 250,000 borrowing who took a fix earlier this year and extended it in 2023 would add £ 600 a year to their mortgage costs, while someone borrowing £ 450,000 would add £ 1,068 a year to their costs”, said Laura Suter, head of personal finance for the company.

She added that someone with a current average floating rate of 2.4% and a mortgage of £ 250,000 could increase their annual costs by £ 696 through 2023, while the cost of those with £ 450,000 borrowing would increase by £ 1,260 per year .

Data from the banking industry shows that a sizeable majority of borrowers (74%) currently opt for fixed rates and are thus protected from short-term rate hikes.