Resolution Foundation reports that approximately 800,000 individuals will experience an average increase of £2,900 per year in their mortgages

According to the Resolution Foundation, the upcoming rise in interest rates will result in an average annual increase of £2,900 for individuals seeking to remortgage their homes starting in 2024. The think tank predicts that the average two-year fixed rate deal will reach 6.25% in the near future, leading to a challenging situation for UK mortgage holders, referred to as a “mortgage crunch.”

The group estimates that approximately 800,000 individuals will be looking to remortgage in the coming year. In response, a spokesperson from the Treasury stated that they have implemented “tailored support” to assist homeowners facing difficulties in meeting their mortgage payments.

In recent weeks, borrowers have already experienced significant rate hikes by lenders. Furthermore, it is anticipated that the Bank of England will raise interest rates once again in the upcoming week.

Earlier this week, Chancellor Jeremy Hunt stated that the Bank had no choice but to increase rates as part of its strategy to address inflation and control the surge in prices.

However, the Resolution Foundation projects that it will reach its peak of nearly 6% by mid-2024.

The mortgage market has swiftly responded to these projections, resulting in the withdrawal of existing deals and their replacement with higher-rate alternatives.

According to financial data firm Moneyfacts, the average two-year fixed-rate loan for homeowners on Friday was recorded at 5.98%, marking a significant increase from 3.14% compared to the previous year.

The Resolution Foundation, an independent think-tank dedicated to enhancing living standards for individuals with low to middle incomes, has projected that the average two-year mortgage deal is unlikely to drop below 4.5% until the conclusion of 2027.

According to the Resolution Foundation, such a scenario would result in a notable escalation of the ongoing mortgage crunch.

Overall, it is projected that annual repayments will increase by £15.8 billion per year by 2026 compared to the period before the Bank commenced its rate-raising cycle in December 2021.

According to Torsten Bell, the director of the Resolution Foundation, individuals frequently choose longer mortgage terms when they decide to remortgage.

During an interview on BBC Radio 4’s Today programme, Torsten Bell explained, “Many people are requesting longer mortgage terms as a means to mitigate the immediate impact of higher mortgage bills and alleviate the financial strain.”

Bell emphasized that although opting for longer mortgage terms may offer temporary relief during challenging times over the months and years, it will ultimately result in considerably higher mortgage costs in the long term.

“The manner in which households address this burden is a choice between paying more in the present or deferring the costs to the future,” Bell remarked.



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By Ryan

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