Mortgage rates horror as bills to skyrocket by a devastating £2,900

The Resolution Foundation has warned of a "mortgage crunch" which could see total annual mortgage repayments rise by £15.8billion by 2026.

It comes as the Bank of England continues to hike up the base rate of interest in a bid to curb high inflation.

The rate has rise every time that the Bank's Monetary Policy Committee (MPC) has met since December 2021.

The Bank of England's base rate is currently at 4.5 per cent but the MPC is expected to increase the rate again next week.

Rates are now expected to peak in mid-2024 at nearly 6 per cent, the Resolution Foundation said.

As a result of the increases, high street lenders have ramped up the repayment rates being offered on mortgage deals.

Simon Pittaway, senior economist at the Resolution Foundation, said: "Market expectations that interest rates are going to rise even higher, and stay higher for longer, are having a major effect on the mortgage market, with deals being pulled and replaced with new higher-rate mortgages.

"This means the mortgage crunch is now on track to increase mortgage bills by £15.8 billion, with those remortgaging next year set to see their costs rise by £2,900 on average.

"Of course, market expectations can be wrong, and rate rises may not turn out to be as bad as feared.

"But with three-fifths of Britain’s £15.8billion mortgage hike still to be passed on to households, rising repayments will deal an ongoing living standards blow to millions of households in the run-in to the general election."

Data released by Moneyfactscompare.co.uk yesterday indicated that the average two-year fixed-rate homeowner mortgage was 5.98 per cent.

The Resolution Foundation said it is expected that the average two-year fixed-rate mortgage will not fall below 4.5 per cent until the end of 2027.

A Treasury spokesperson said: "We know this is a concerning time for mortgage holders, which is why the FCA (Financial Conduct Authority) requires lenders to offer tailored support to borrowers struggling to make their payments, and we continue to support mortgage holders through the Support for Mortgage Interest scheme.

"Behind this though is global inflation, continuing to eat away at incomes around the world, which is why the single biggest thing we can do to help families is to halve the rate this year.

"We are also supportive of the Bank of England in their independent decisions on interest rates, and continue to provide around £3,300 per household this year and next to help with rising costs."