With the Bank of England continuing to tackle inflation, homeowners are feeling the squeeze as interest rates continue to increase. The shock rise was predicted after analysis of figures published by Treasury watchdog the Office for Budget Responsibility (OBR) and follows attempts by the Bank of England to tame soaring inflation.
The Liberal Democrats, who carried out the analysis, calculated that for a typical household with an outstanding mortgage of £236,000, the hike next year would mean monthly interest payments doubling to £474 – an extra £2,851 a year.
Millions of homeowners face a “mortgage ticking time bomb,” as many will experience these predicted rises.
Sarah Olney, Lib Dem Treasury spokesman said: “Homeowners are paying the price for the Conservative Government crashing the economy.
“The mortgage ticking time bomb has only seconds left.
“This is simply unmanageable with the tax rises announced by the Chancellor.”
The news will fuel fresh fears that the cost of living crisis will lead to properties being repossessed.
The Lib Dems want the Government to scrap a planned reduction on the surcharge imposed on the banking sector, and use the money to set up an emergency mortgage protection fund to help families seeing their repayments soar.
The OBR bases its figures on its forecast for the Bank of England base rate.
This is currently predicted to peak at close to five percent in 2023-24.
Anyone currently on a variable or tracker mortgage, and those whose fixed rates are coming to an end, will be at risk of higher charges.
Currently, 74 percent of homeowner mortgages are on a fixed rate contract, figures from UK Finance show.
As many as 1.8 million homeowners will come to the end of their fixed-rate deals in 2023, it is thought.
Bill Blain, from investment firm Shard Capital, said mortgage rates coming down depended on “when we can create stability again”.
He said: “There’s a lot of work to get UK interest rates to come back down especially when we still face an enormous inflation threat.
“The only way you can address inflation is by continuing to raise interest rates, so I think we’re a long way from seeing mortgage rates start to come down.”
He explained to Express.co.uk that if the Government doesn’t do something to address this, and quickly, Britons could find themselves facing another housing crisis.
Money Saving Expert Martin Lewis has also warned that UK homeowners face a “ticking mortgage time bomb”.
In a letter to the Telegraph on October 18, he said: “If Britain’s base rates continue to rise towards five or six percent, as the markets predict for next spring, we risk a triple threat.
“The impact on mortgage rates themselves; the fact that fewer people will pass affordability checks to get the cheapest deals; and that there could be a house price correction – with mortgage holders’ loan-to-values dropping – hurting people’s ability to secure the cheapest rates.”
Mr Lewis said he wanted to see “regulatory preparation and intervention to help protect people”.
This could include changing re-mortgage rules so people find it easier to get cheap deals, he added.
His other ideas are to allow payment holidays and require mortgage lenders to make it easier for people to change their home loan length.
Mr Lewis concluded: “This needs investigating now, rather than waiting to see what happens, because, as recent evidence shows, prevention is better than cure.”