Nearly a million households will see their monthly mortgage bills surge by £500 a month over the next three years, the Bank of England has said.
Speaking this morning, Governor of the Bank of England Andrew Bailey admitted there "will be consequences" of the higher base rate of interest imposed by the UK central bank.
He said: “It is going to have an impact clearly… that is part of the transmission of monetary policy, no question about that.
“What we are seeking to do here… is balance having the transmission of monetary policy with – the two things that I would emphasise – the resilience of the banking system, and the ability to support customers and therefore manage the consequences of this.
Andrew Bailey said he had no choice but to increase the base rate of interest
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“But there will be consequences from increased interest rates I’m afraid because that, from a monetary policy perspective, is why we have to do it.”
The Bank of England's Monetary Policy Committee has made 13 consecutive interest rate rises since December 2021.
Last month it raised the base rate by half point to five per cent - its highest level since 2008.
Some four million fixed-rate mortgage holders are still set to face a hike in borrowing costs between now and the end of 2026.
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Chancellor Jeremy Hunt announced new measures on June 23 that would help avoid homeowners being evicted due to repayment rate increases.
Those struggling with repayments will be given a 12-month grace period before repossessions begin and households can temporarily switch to an interest only mortgage to help ease the burden.
Some four million fixed-rate mortgage holders are still set to face a hike in borrowing costs between now and the end of 2026.
Buy-to-let landlords are also being impacted by higher mortgage rates, which has caused some to sell up or pass on higher costs to renters, the Bank found.
Sir Jon Cunliffe said banks were in a better position to protect customers than in 2008
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Sir Jon Cunliffe, the Bank’s deputy governor today said UK households are carrying less debt and banks are in a better position to support customers than during the 2008 financial crisis.
“I think the big difference is that the amount of household debt being carried is much lower now than it was at the time of the financial crisis, so households are not over-levered as they were before”, he said.
“And that’s one of the reasons why we think that households in distress… that proportion of households will be considerably smaller.
“I think it’s clear that inflation hits the poorest off in society worse, and that’s one of the reasons why we need to get it under control.”
