Mortgages soar £200 a month amid rate rises

MONTHLY mortgage repayments have jumped by almost £200 since the Bank of England started to ramp up interest rates two years ago, official figures show, piling more pressure on families still reeling from the cost of living crisis.

Indebted households face paying the equivalent of an extra £2,220 a year on average, according to direct debit figures published by the Office for National Statistics (ONS). Across the UK’s 8.5m residential mortgage borrowers, that amounts to close to £20bn more cash being paid out for housing costs.

The average mortgage payment broke through the £900 mark in December, rising to £903, the ONS found.

It has risen by £100 from the £803 typically paid a year earlier and by £185 from the average £718 monthly payment made in December 2021, when the Bank of England first began raising its base rate from the pandemic-era low of 0.1pc to today’s high of 5.25pc.

In the first lockdown, the average payment fell to a low of £657 per month – almost £250 below current levels.

The surge in mortgage costs has coincided with rising prices across the economy, putting pressure on household finances. Martin Beck, chief economic adviser to the EY Item Club, said mortgage payments have risen more rapidly than earnings since the pandemic struck, hitting families’ spending power.

He said: “Even strong wage growth has not been sufficient to compensate for higher mortgages.

“Things are probably going to get worse as wage growth slows at the same time as mortgage payments continue to climb, reflecting the fact that 1.5m households are going to refinance this year at higher rates.”

The aim of the Bank’s interest rate increases is to crack down on inflation, which rampaged to a peak of 11.1pc in October 2022, far above the Monetary Policy Committee’s 2pc target.

Mortgage rates offered by lenders have fallen back in recent weeks as banks and building societies expect the Bank of England to start cutting rates this year.

But even as the most competitive fixed rates available fall below 4pc, this will still represent a significant increase for 100,000 homeowners coming to the end of five-year fixed deals agreed when rates were at historic lows. As a result the average monthly payment is expected to keep rising.