Millions of landlords who renegotiate their mortgages next year face an average annual increase in repayments of £3,000, according to research which warns that 2023 will bring additional financial hardship for borrowers.
A report by the Resolution Foundation think tank says the two million homeowners who will have to renegotiate their mortgages next year will face the highest interest rates since 2008. An average fixed-rate repayment would increase from £750 to £1,000 per month.
The UK economy is one of the economies most at risk for higher interest rates, which feed directly into higher mortgage rates. With a base interest rate of 3.5 percent, interest on an average two-year fixed mortgage with a loan-to-value ratio of 75 percent has risen to 5.9 percent, according to Bank of England data.
Two-year mortgage rates rose above 6 percent after the mini-budget in September and are up from 1.5 percent a year ago. Nearly one million households on floating-rate mortgages will face rising interest rates, with investors expecting the Bank of England to raise borrowing costs above 4 per cent by spring.
The think tank’s chief executive Torsten Bell said millions of homeowners would face a “four-digit increase in their mortgage bills”, as well as the worst annual drop on record in disposable income, as inflation eroded the value of earnings. Will do He added that “2023 should see the back of double-digit inflation” but “it appears to be a groundhog year for many households, whose incomes will fall as much as they did in 2022. As for living standards, things will Get worse in 2023 before they start getting better.”
Separate figures from PwC found that around nine million Britons would need an overdraft to meet their daily spending needs and would struggle to repay outstanding loans, classifying them as “economically vulnerable”. Have to do
Analysis by PwC and Totally Money found that consumers were taking out more expensive loans to meet the rising cost of living. An average UK household owes a record £16,200 in unsecured debt, which can include loans for cars and credit cards, totaling more than £400 billion of unsecured debt across the economy.
With the rate of loan growth set to exceed £1,000 per household in 2022, loans become more expensive. In 2016, the average household had £10,000 in unsecured debt, a record at the time.
“Unsustainable lending and borrowing can cause real harm to individuals and society, and vulnerable consumers may be disproportionately affected,” said Isabel Jenkins, head of financial services at PwC.
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