Rocketing mortgage rates set to hit households harder than in the 80s

Rapidly rising mortgage rates will hit households harder than they did in the 1980s, swallowing more than half of wages by the end of the year, experts say.

Figures show homeowners have seen payments skyrocket, or will increase over the next few months as their current contracts end.

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Around 4.2 million households have faced a £1,500 increase in their annual mortgage costs.

The standard variable rate currently sits at less than 6%, adding almost £3,000 to the average annual payout.

Financial information company Moneyfacts fears it could grow to 8.77% next year.

That will depend on the Bank of England bringing its base rate up to 5.75%, which many experts believe will happen.

The bank is expected to raise interest rates from 4.5% to 4.75% next week – the 13th consecutive increase – in an attempt to curb inflation.

A fearsome increase next year will see an additional 3% of household budgets go into mortgage costs.

In the 1980s, with cheaper homes and less debt, the rate was 2.4% – even though mortgage rates were closer to 15%, the Resolution Foundation research arm said.

The government has called on banks to protect mortgage holders and Lib Dem leader Sir Ed Davey has called for a £3bn fund to support those facing potential foreclosures. return.

It comes as public confidence in the Bank of England in controlling inflation has hit an all-time low.