e. The Bank of England’s efforts to stem stubbornly high inflation have boosted home loan payments, according to a new report released by the National Institute of Economic and Social Research (NIESR) on Thursday.
The report warns that British homeowners may have to pay 50% more on their mortgages by the end of the year due to the Bank of England’s interest rate hikes. This could wipe out the savings of around 1.2 million British families, bringing the total number of bankrupt households to 7.8 million, or 28% of the country’s total.
The NIESR analysts also calculated that the surging mortgage repayments would eat up 0.3% of the UK’s gross domestic product (GDP) and cost households a total of £12 billion ($15.2 billion) a year.
The warning comes after the Bank of England raised interest rates by 0.5 percentage points to 5% in an attempt to curb persistently high inflation in the country. While annual consumer price inflation remained unchanged at 8.7% in May, core inflation, which excludes volatile energy, food, alcohol, and tobacco, rose to 7.1%, the highest level since 1992.
Max Mosley, an analyst at NIESR, explained that the rise in interest rates to 5% will push millions of mortgaged households to the brink of bankruptcy. He emphasized the need for investment in forbearance agreements that allow households and lenders to create payment schedules that work for each other.
Since last year, the average adjustable rate home loan in the UK has more than doubled from around 3% to 6.19%. This has affected around 4 million UK households who either have adjustable rate mortgages or are having to restructure their debt due to the end of their fixed rate contracts.
For a household borrowing £300,000 ($381,000) on a 25-year mortgage, monthly repayments have already increased from £1,400 ($1,780) to £2,000 ($2,540), an increase of almost 50%. The NIESR warns that with expected interest rate hikes, these bills will only continue to rise.
The Bank of England’s efforts to curb inflation have had unintended consequences for homeowners, putting them at risk of bankruptcy and wiping out their savings. As interest rates continue to rise, it is crucial for the government and lenders to provide support and create payment schedules that are manageable for households.Title: Bank of England’s Interest Rate Hikes Could Wipe Out Savings of Millions of British Homeowners, Warns Study
Subtitle: National Institute of Economic and Social Research (NIESR) report reveals the potential impact of rising mortgage repayments on UK households
Date: June 24, 2023
The Bank of England’s efforts to stem stubbornly high inflation have raised concerns about the financial stability of British homeowners. A new report released by the National Institute of Economic and Social Research (NIESR) on Thursday warns that mortgage payments could increase by 50% by the end of the year due to the central bank’s interest rate hikes.
According to the study, the surge in mortgage repayments could wipe out the savings of approximately 1.2 million British families, pushing the total number of bankrupt households to 7.8 million, which accounts for 28% of the country’s total. The analysts also estimate that these increased repayments would consume 0.3% of the UK’s gross domestic product (GDP) and cost households a total of £12 billion ($15.2 billion) annually.
The NIESR’s warning comes in the wake of the Bank of England’s decision to raise interest rates by 0.5 percentage points to 5% as part of its efforts to curb persistently high inflation in the country. While annual consumer price inflation remained unchanged at 8.7% in May, core inflation, which excludes volatile energy, food, alcohol, and tobacco, rose to 7.1%, the highest level since 1992.
Max Mosley, an economist at NIESR, explained that the rise in interest rates to 5% would push millions of mortgaged households to the brink of bankruptcy. He emphasized the need for investment in forbearance agreements that allow households and lenders to create payment schedules that work for each other, as no budget can withstand a shock of this magnitude.
Since last year, the average adjustable rate home loan in the UK has more than doubled from around 3% to 6.19% as of Thursday morning. This has affected approximately 4 million UK households who either have adjustable rate mortgages or are restructuring their debt due to the end of their fixed-rate contracts.
For households borrowing £300,000 ($381,000) on a 25-year mortgage, monthly repayments have already increased from £1,400 ($1,780) to £2,000 ($2,540), representing an increase of almost 50%. The NIESR warns that with expected interest rate hikes, these bills will only continue to rise.
The impact of these rising mortgage repayments on British homeowners is a cause for concern, as it could have significant implications for the overall economy. The Bank of England and the government may need to consider measures to support households and lenders during this challenging period.
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Sources:
– National Institute of Economic and Social Research (NIESR)
– Bank of England
– RT Business Section
What measures can the government and lenders implement to support households and prevent bankruptcy as interest rates continue to rise
B persistently high inflation. While overall consumer price inflation remained steady at 8.7% in May, core inflation, which excludes volatile energy, food, alcohol, and tobacco prices, rose to 7.1%, its highest level since 1992.
Max Mosley, an analyst at NIESR, explained that the increase in interest rates to 5% could push millions of mortgaged households to the brink of bankruptcy. He emphasized the need for investment in forbearance agreements that would allow households and lenders to create payment schedules that are mutually manageable.
The report also highlights the impact on adjustable rate mortgages, which have more than doubled from 3% to 6.19% since last year. This has affected approximately 4 million UK households, either through adjustable rate mortgages or the need to restructure their debt upon the expiration of fixed-rate contracts.
For households borrowing £300,000 ($381,000) on a 25-year mortgage, monthly repayments have already increased from £1,400 ($1,780) to £2,000 ($2,540), an increase of nearly 50%. The NIESR warns that further interest rate hikes will only lead to further increases in these bills.
The Bank of England’s efforts to curb inflation have inadvertently put homeowners at risk of bankruptcy and eroded their savings. Therefore, it is crucial for the government and lenders to provide support and establish payment schedules that are manageable for households as interest rates continue to rise.
The potential 50% increase in home loan payments due to the Bank of England’s interest rate hikes is concerning and could have significant implications for homeowners. It is crucial for individuals to carefully assess their financial situation and plan for these changes to avoid any negative impacts on their budget and overall financial stability.