UK Remortgagers to Face Average Increase of £2,900 a Year Due to Rising Interest Rates, Warns Resolution Foundation

This increase is expected to affect around 800,000 people.

The average two-year fixed rate deal is expected to hit 6.25% by the end of this year, which will lead to a "mortgage crunch." The Treasury has already provided support for homeowners struggling to make their mortgage payments.

Borrowers have already seen big increases in their mortgage payments after lenders hiked rates over the past fortnight.

The Bank of England is expected to raise interest rates again next week, and the base rate is expected to peak at nearly 6% in mid-2024.

This will significantly increase the scale of the mortgage crunch currently unfolding, according to the Resolution Foundation.

As a whole, annual repayments are on track to be £15.8bn a year higher by 2026 compared with prior to when the Bank started its rate-raising cycle in December 2021.

The director of the Resolution Foundation said people are often opting for longer terms when they remortgage, which helps them through some difficult times over the months and years, but the mortgage costs them significantly more overall.

The Resolution Foundation has predicted that this year's rise in interest rates will increase the cost of a typical mortgage by 3% of a household's income, which is more than the 2.4% increase seen in 1989.

However, the current mortgage crunch is less widespread than in previous shocks, which is "better news for the government." Around 7.5 million people with a mortgage are expected to see their repayments rise by 2026.

The government has said it will support mortgage holders through the Support for Mortgage Interest scheme and has provided £3,300 per household to help with rising costs.

However, Labour's Shadow Chancellor has criticized the Conservatives for weakening the economy and failing to provide economic stability.