Ministers have been warned that the growing mortgage crisis will have a greater impact on middle earners than the energy bill crisis. New evidence shows that rising rates could result in some households paying over £5,000 extra on their mortgages annually, far surpassing the additional energy costs they face. Labour has taken a significant lead among mortgage payers, with the latest Opinium poll indicating a 31-point lead for the party. With more than 2.4 million fixed-rate homeowner mortgage deals expiring by the end of 2024, and average two-year deals now above 6%, many homeowners could see their interest rates triple in the coming months. This comes at a time when interest rates are the highest since the 2008 financial crisis, following the Bank of England’s recent decision to raise them to 5%.
Public First consultancy conducted analysis for the Observer, revealing that the impact of mortgage rises could be far greater than the surge in energy bills for certain households. Particularly affected are those under the age of 45, as their interest payments make up a larger proportion of their mortgage. If their mortgage rates triple, typical mortgage holders in this age group could see their annual costs increase by more than £4,000. Rachel Wolf, a founding partner of Public First, warned that rising house prices will have devastating consequences for squeezed millennials and those in the expensive southeast. She emphasized that as interest rates rise and low mortgage rates end, middle-class individuals who aren’t yet retired will suffer even more than they did during the energy bill crisis.
Tory MPs are expressing despair and frustration over the situation, with concerns that the government has been slow to understand the severity of the crisis. Chancellor Jeremy Hunt has already held meetings with major mortgage lenders, securing a 12-month grace period before repossession proceedings begin. However, there is growing discontent among MPs, and some believe the government needs to take more decisive action. Lucy Allan, an MP who was one of the first to raise concerns about mortgages, argued that the government’s misconception that mortgage holders are all from the comfortable middle class is misguided. She pointed out that many young families entered the housing market when interest rates were low and are now facing substantial increases. Allan believes that simply raising interest rates will not bring down inflation if only a small group of people suffer, as it will not affect discretionary spending or the property market.
In light of the mortgage crisis, the Liberal Democrats are strategizing on how to take advantage of the situation in the Tory-held blue wall seats. They have identified 29 seats where the number of households with a mortgage exceeds the current majority of the Conservative MP. The most vulnerable seat is Carshalton and Wallington, where a shift of just 4% of households with a mortgage could result in the Conservatives losing. This is followed by Wimbledon, Cheltenham, and Winchester. Overall, Labour has gained significant ground in the latest Opinium poll, with a lead of 18 points over the Tories. Keir Starmer is also favored as the best prime minister by voters, leading Rishi Sunak by 30% to 22%.
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