Projecting the Effect of Peak Bank Rate on Mortgage Holders

Main points

• Overall, nearly 4 million households will see higher monthly mortgage repayments as a result of the higher bank rate
• The typical monthly repayment on a fixed-rate mortgage will rise from around £700 to £1,100 on average, and from around £500 to £900 on average for those on a variable-rate mortgage; this is a 50 per cent increase
• This £400 increase in monthly repayments will wipe out the savings of a further 1.4 million households by 2024 as a result of higher mortgage repayments; the total number of households without savings will stand at around 7 million (1 in 4, or 25 per cent)
• The households who will lose out the most are concentrated in the West Midlands, the North-West, Wales and Scotland
• £1.2 billion per month, or £14 billion per year, will be spent on increased mortgage repayments (0.5 per cent of GDP)

NIESR has previously estimated the effect of the expected peak bank rate on those households with a variable rate mortgage (Mosley, 2022b).  This briefing note extends the previous analysis by estimating the effect the higher bank rate will have on those households that need to re-mortgage their fixed-rate plan.

In doing so, we have incorporated the estimated increase in monthly mortgage repayments into our existing projections regarding household savings to provide insights into the compounding effect this latest shock to real incomes has had within the context of the cost-of-living crisis.

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