The number of households paying over three per cent for their mortgage will rise to two thirds by the end of the year, meaning many people could be paying thousands of pounds more.
According to research from Capital Economics, only a third of households have mortgage rates above three per cent.
It explained that as mortgage rates continue to rise by December this proportion rises to more than two thirds.
Capital Economics noted that many lenders had withdrawn mortgage deals and will replace and reprice them with higher rates.
It noted that the average two-year fixed would increase above the 5.82 per cent average rate recorded last week by Moneyfacts.
“In other words, higher interest rates will soon bite harder. Forecasters just need to wait for the effects to show up. That’s why we still think there will be a recession in the second half of this year,” the firm said.
Capital Economics said that due to the tight labour market and high core inflation, the Bank of England is likely to hike interest rates from 4.5 per cent to 4.75 per cent.
The company said that the household sector was only spending 3.7 per cent of their income son interest payments in the last quarter of last year. This is not much higher than the 3.4 per cent in Q3 2021 when interest rates are 0.1 per cent.
Capital Economics attributed this to the “strength of employment, nominal wages and government handout”, as well as the interest rate households are paying has risen from 2.5 per cent to 2.8 per cent.
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
