Mortgage collapse: 400,000 people will struggle to pay rising home loans

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They face a £250 monthly increase – from £610 per month to £860 per month – on a 5.5% mortgage rate. That’s the current average for those looking to remortgage after Thursday’s interest rate hike by the Bank of England.

And these households would see their monthly housing costs rise from 38% to 54% of their monthly income – more than half of their income – researchers from the Joseph Rowntree Foundation have found.

The warning follows the biggest hike in the bank rate since the 1980s.

The central bank’s Monetary Policy Committee raised the base rate from 0.75% to 3%.

The eighth straight rise came with a grim forecast that the UK is heading into what could prove to be the longest recession in a century.

Chancellor Jeremy Hunt acknowledged the difficulties facing landlords. He admitted the move would be “very difficult for families with mortgages across the country”.

But he said it was necessary to act now and avoid tougher measures in the future.

Mr Hunt told broadcasters: “The best thing the government can do, if we want to reduce these interest rate hikes, is to show that we are reducing our debt. Families across the country need to balance their books at home and we need to do the same as a government.”

The 400,000 homeowners represent an additional 120,000 households that will be pushed into dire straits over the coming year.

Currently, 750,000 households or 2.4 million owners live in poverty.

And that rate for owner households will rise from 10% in 2020/21 to 12% this year – the highest poverty rate for this group in a decade.

A family is considered to be in poverty if its income is less than 60% of the median household income.

For a childless couple – after housing costs – the median income was £24,600 in 2020/21.

They would therefore be below the poverty line with an income of £14,800 or less a year.

Darren Baxter-Clow, Rowntree’s senior policy adviser, said: “The government should rightly be concerned about the impending mortgage crisis and the crisis that private tenants are already facing.

“Support must target poor mortgage holders and those who could be pushed into poverty by their housing costs, who are at risk of losing their homes, as well as private tenants who are already facing rapidly rising costs.

“However, any support should not just prop up a stalled housing market. Sky-high house prices have kept millions out of home ownership for decades and trapped too many in an unaffordable, precarious private rental sector. and of poor quality.

“Any crisis support must end the current cycle of boom and bust and work towards a healthier and fairer housing system.”

Household budgets are set to be further stretched with upcoming tax hikes and spending cuts to be announced by Mr Hunt, left, in the November 17 autumn statement.

Graham O’Malley, senior debt expert at Citizens Advice, said: “Keep paying what you can. That’s our advice to anyone struggling with their mortgage payments.

‘There is help out there. Talk to your lender, talk to us at Citizens Advice or other charities.

“If your fixed rate contract comes to an end, you will almost inevitably pay more.

“But it’s always worth looking for a better deal and negotiating with your lender, even if the mortgage market is changing rapidly.”

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