The IFS says that this is an "eyewatering" prospect and a "serious shock" for the market, with 8.5 million people potentially having to spend a fifth of their income on mortgage payments.
The warning comes as Bank of England policymakers prepare to raise the base rate again to tackle inflation in the UK economy.
The latest inflation data, along with a surge in basic pay, has driven up expectations that the Bank will have to maintain its rate rises for longer than anticipated, possibly up to 6%.
This has already led to a rise in mortgage costs, which has prompted calls for government aid, but Chancellor Jeremy Hunt has ruled this out due to fears that it could fuel inflation.
LONDON DAILY ARCHIVE
IFS Warns of Looming Mortgage Crisis as Interest Rates Set to Rise
The Institute for Fiscal Studies (IFS) has warned that an estimated 1.4 million mortgage holders in the UK, of which half are under 40 years old, could lose more than 20% of their disposable income as interest rates rise.
21 June 2023 · 19:29 UTC
