The Joseph Rowntree Foundation (JRF) said an extra 120,000 UK households, equivalent to 400,000 people, will be pushed into poverty when their current mortgage deal ends. The analysis assumes mortgage rates remain high and homeowners are forced to move to a 5.5% rate. With a current 2% rule, this change would mean they spend 54% of their monthly income on housing costs, up from 38%. In cash, this equates to an average increase of £250, from £610 a month to £860 a month. Mortgage rates are on the rise due to this year’s Bank of England key rate hike, but they rose after Kwasi Kwarteng’s disastrous mini-budget and have remained high. The warning comes after the Bank of England raised borrowing costs to 3% in the biggest rise in the single rate since 1989. However, the impact on the mortgage market was muted as lenders had already priced in a fat rise in rates with some actually cutting their interest rates amid calmer financial markets. On Friday the cost of an average two-year fix was 6.45%, while an average five-year deal was 6.28%, according to data firm Moneyfacts. Just over a year ago it was possible for mortgage borrowers to lock in a rate below 1% for two or five years. Low-income people with mortgages are already under extreme financial pressure as rising food, fuel and energy costs stretch household budgets to the limit. JRF says 750,000 households, or 2.4 million people, with a mortgage are already in poverty. Turmoil in the mortgage market would increase competition for rental properties and could lead to a sharp rise in rents for new lets as buy-to-let landlords pass on their higher loan costs, the anti-poverty charity said. Even if the housing market returns to “normal”, where mortgage rates fall below 3% and house prices are stable, lending criteria could be tightened, making it more difficult for first-time buyers to climb the property ladder. he said. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. JRF senior policy adviser Darren Baxter-Clough said the government should step in to support landlords and tenants affected by the mortgage crisis, but should not “prop up a broken housing market”. “Exorbitant house prices have excluded millions from home ownership for decades and trapped too many in an unaffordable, insecure and poor-quality private rented sector,” he said.
