A leading anti-poverty charity has called on the government to provide more support to those facing rising mortgage costs so people don’t lose their homes.
The Joseph Rowntree Foundation warned that the safety net for the lowest-income homeowners is “extremely limited” amid spiraling interest rates and worsening cost of living crisis.
Two-year average mortgage rate reached 6% this weekleaving homeowners across the UK facing staggering increases in their mortgage payments every month.
The number of available mortgage deals has also decreased, with hundreds recalled in the wake of the government’s mini-budget at the end of September which caused a crisis in the UK economy.
Interest rates had already been rising due to high inflation, hitting 2.25% in September, but Liz Truss and Kwasi Kwarteng’s loan-financed wave of tax cuts raised concerns it will exacerbate the problem.
The Bank of England (BoE) is expected to continue to hike interest rates sharply, with some forecasts suggesting the base rate could hit 6% next year, sending mortgage rates soaring.
The Joseph Rowntree Foundation (JRF) anti-poverty think tank has warned that homeowners across the income scale are feeling the squeeze, but those with the lowest incomes face a precipice of support.
Analysis from the JRF on Friday revealed that a mortgage interest rate rising from 2.1% to 6% means a family buying with a mortgage could see their monthly mortgage payments rise from £630 to £1,100.
The think tank says this, combined with skyrocketing costs for energy, food and transport, is leaving low-income households facing “acute” strain from little available state support.
For a working-age household to receive support with unaffordable mortgage payments, they must have claimed Universal Credit (or an equivalent benefit) for nine months prior.
And the support is in the form of a loan, with interest, and applicants cannot earn additional money beyond Universal Credit or equivalent to be eligible.
JRF Senior Economist Rachelle Earwaker said the aid is “extremely limited” and urged the government to provide support to those facing staggering costs.
“Support to help pay your UK mortgage is extremely limited if you are going through hard times – for working-age households, you must have been on Universal Credit or equivalent for at least nine months, with no additional income during that period,” said. alarm clock.
“Support for low-income renters is also weak at the moment, with housing benefits frozen at September 2019 levels while rents soar across the country.
“The government must take urgent action to ensure that low-income households who are renting or who may be struggling with rising mortgage costs do not lose their homes.
“We must reform the support for mortgage interests and urgently strengthen support for tenants.”
It comes as Labor warns that homeowners exiting two-year fixed-term mortgages across the UK could face mortgage hikes of £500 a month.
“These eye-watering mortgage increases will give homeowners across the country sleepless nights, and the Tory government is entirely to blame,” said Labor leader Keir Starmer.
“Liz Truss and Kwasi Kwarteng crashed the economy with their attempts to deliver huge unfunded tax breaks to those who need them least.”
He added: “The Prime Minister must reverse her kamikaze budget, including her entirely unfunded £17bn corporate tax donation to the biggest companies.
“The burden of the Tory’s fantasy economy should not fall on the workers.”
Watch: Mortgages pulled from sale as market falters after mini budget