The Bank of England (BoE) is widely predicted to raise interest rates once again on 15 September, when the next meeting of the monetary policy committee is held. The Independent reports that the move will be an attempt to tackle soaring inflation, but the impact will be felt most by older and lower-income mortgage borrowers.
The interest rates have already risen from 2.32% in December 2021 to 3.27% in July, and some analysts predict that they may rise to 4% by next May. This will come as a shock to millions of householders who are on fixed-rate mortgages, and are yet to absorb this year’s increases in their monthly repayments.
Jonathan Cribb associate director, and David Sturrock, senior research economist at the Institute for Fiscal Studies (IFS) commented: “As higher interest rates feed through to mortgage interest rates, the proportion spending more than a fifth of their after-tax income on mortgage repayments could get close to the levels last seen in 2007–08.”
They added: “Not only will wider inflationary pressures be putting a greater pressure on their household budgets, but more than two-in-three low-income mortgagors could end up paying more than a fifth of their income on mortgage repayments, if mortgage interest rates rise by 2.50 percentage points.”
Those who are on variable rate mortgages, which are directly linked to interest rates, and is thought to be around 7 million people in the UK, will have already have been subject to increased monthly mortgage repayments.
Because these are more likely to be older borrowers (aged 55 to 59), it is thought that older people, and lower earners, will be pushed into spending over half their monthly income on mortgage repayments.
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