Mortgage meltdown... 400,000 will struggle to pay

HUNDREDS of thousands of poorer homeowners will be dragged under the poverty line by soaring mortgage costs, campaigners have warned.

Around 400,000 households will find themselves on a cliff edge financially as they struggle to pay rising home loans alongside spiralling energy and food bills.

They face a monthly increase of £250 – from £610 a month to £860 a month – on a mortgage rate of 5.5 per cent.

This is the current average for those looking to re-mortgage after Thursday’s interest rate hike by the Bank of England.

And these households would see their monthly housing costs increase from 38 per cent to 54 per cent of monthly income – over half their earnings – found researchers for the Joseph Rowntree Foundation.

The warning comes in the wake of the biggest single Bank rate rise since the 1980s.

The central bank’s Monetary Policy Committee increased the base rate by 0.75 per cent to three per cent.

The eighth consecutive rise was accompanied by a bleak forecast that the UK is heading towards what could prove to be the longest recession in a century.

Chancellor Jeremy Hunt acknowledged the difficulties facing homeowners. He admitted that the move would be “very tough for families with mortgages up and down 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 bring down these rises in interest rates, is to show we are bringing down our debt. Families up and down the country have to balance their accounts at home and we must do the same as a government.”

The 400,000 homeowners make up an additional 120,000 households to be pulled into dire straits over the coming year.

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

And this rate for homeowning households will increase from 10 per cent in 2020/21 to 12 per cent this year – which is the highest

the poverty rate has been for this group in a decade.

A family is considered to be in poverty if their income is below 60 per cent of the median household income.

For a couple with no children – after housing costs – the median income was £24,600 in 2020/21.

So they would be under the poverty line on an income of £14,800 or less annually.

Darren Baxter-Clow, senior Rowntree policy adviser, said: “The Government should rightly be concerned about the looming mortgage crisis and the crisis already being faced by private renters.

“Support must be targeted at mortgage holders in poverty and those who could be pulled into poverty by their housing costs, who risk losing their homes, along with private renters who are already facing rapidly rising costs.

“However, any support must not just prop up a broken housing market. Exorbitant house prices have shut millions out of homeownership for decades and trapped too many in an unaffordable, insecure and poor quality private rented sector.

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

Household budgets are set to be stretched further with forthcoming tax rises and spending cuts due to be announced by Mr Hunt, left, in the Autumn Statement on November 17. Graham O’Malley, senior debt expert at Citizens Advice, said: “Carry on paying what you can.

“This is 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 debt charities.

“If your fixed-rate deal is coming to an end, you will almost inevitably pay more. “But it is still worth shopping around for a better deal and negotiating with your lender, even though the mortgage market is changing rapidly.”