BOE says 4 million households to face higher payments in 2023
THE Bank of England (BOE) said 4 million households will feel a significant increase in mortgage payments next year and a further 2 million by 2025, adding to headwinds facing the housing market.
The central bank said the average payment for those who remortgage will reach 1,000 pounds a month next year – £250 a month higher than the current level. That would cause severe financial difficulties for an extra 220,000 households, taking the total struggling to service their debt to 670,000.
Within three years, 70 per cent of mortgage holders will see their payments increase.
The findings in the BOE’s report on risks to the financial system underscore the weaker outlook many economists have for the housing market. Property prices have fallen for three months, the sharpest downturn since the global financial crisis more than a decade ago.
The BOE said buy-to-let investors were particularly vulnerable, since about 85 per cent of mortgages to landlords were interest only, making them highly sensitive to rising borrowing costs.
It warned that landlords would either raise rents for tenants or sell off their portfolios, causing a deeper fall in house prices.
“Were landlords to seek to offset the projected rise in buy-to-let mortgage costs, it was estimated they would need to increase their rental income by around 20 per cent,” the BOE report said. “This would increase the cost of housing for renters.”
The BOE has lifted its benchmark lending rate eight times in the past year, seeking to choke off inflation that’s lingering at a 41-year high. BLOOMBERG
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