London households face an annual bill rise by up to £7,300 when they remortgage this year, a think tank has warned.
Around 3.5 million households are yet to face the impact of rising mortgage rates as they are still on cheap fixed deals and nationally will have to spend an extra £9bn in interest over 2023 and 2024, according to the Centre for Economics and Business Research.
The research shows the average borrower will see their monthly mortgage bill jump by £325 while annual interest payments will rise by an average of £3,900 a year.
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Those remortgaging in 2024 will pay an extra £3,200 a year in interest.
Households in the most expensive part of the UK will see the biggest increases. A London homeowner coming to the end of a fixed rate deal this year will pay an extra £608 a month when they remortgage while those doing the same in the South East will pay an extra £450 a month.
It comes after 12 consecutive rises to the Bank of England’s base rate since December 2021. Last month the central bank raised interest rates to 4.5%, the highest level in 15 years.
The Resolution Foundation has previously predicted that the scale of the living standards shock will be particularly high for those low and middle-income households who are affected.
Younger home-owning families, who tend to have lower incomes than older households and higher mortgages relative to incomes, will also face a sharp living standards hit, the foundation said.
Simon Pittaway, senior economist at the Resolution Foundation, said: “While interest rate rises might be coming to an end, there will be plenty more mortgage pain to come.”
Meanwhile, Labour said homeowners are being hit with a “Tory mortgage penalty” of £7,000 per year, with interest rates triple what they were two years ago.
Pat McFadden, shadow chief secretary to the Treasury, blamed what he called the “reckless economic gamble” taken by the Conservatives during September’s mini-Budget.
Liz Truss became the shortest serving prime minister in modern British political history after the fallout from her and then-chancellor Kwasi Kwarteng’s so-called Growth Plan that sent the value of the pound tumbling and mortgage rates soaring.
Analysis by Labour suggests the average homeowner is forking out an extra £150 every week since what officials called the “kamikaze mini-Budget” in the autumn.
Where to get help if you’re struggling with mortgage payments
A spokesperson for trade association UK Finance said: “Lenders stand ready to help anyone who might be concerned about their mortgage payments. If you’re struggling, don’t put it off – speak to your lender as early as possible.
“Banks have a range of tailored options available to help. Your lender will work with you to find the best option for your individual circumstances.”
Under guidance from the Financial Conduct Authority (FCA), the lending industry must consider a range of support options, including:
- part-payment plans
- mortgage term extensions
- temporarily transferring to an interest-only mortgage
- deferring interest due
Additional reporting from PA
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