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Rising mortgage rates equivalent to 2p income tax hike, Liberal Democrats say

  • 26/06/2023
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Rising mortgage rates equivalent to 2p income tax hike, Liberal Democrats say
Increasing mortgage rates could lead to a £15bn hit to the economy, equivalent to a 2p income tax hike, research has shown.

According to research from the Liberal Democrats, which combined data from the Resolution Foundation on mortgage repayments and HMRC figures on tax changes, annual mortgage repayments are expected to be around £15bn higher in December 2024 compared to the end of 2021,

The party said this was more than a £13.7bn tax hit that could come from a 2p increase in the basic rate of income tax.

The research continued that for individual households with a mortgage, the impact could be more significant.

It explained that a typical household with an outstanding mortgage of £145,000 taken out in 2021 could be hit with a mortgage payment increase of around £3,600 a year, equal to a 6p hike in income tax.

The Liberal Democrats are calling for a Mortgage Protection Fund, which could offer targeted support of up to £300 a month to families facing the steepest rise in mortgage costs and at risk of losing their homes.

It noted that this could be based on past schemes and fully paid for by reversing Conservative tax cuts to big banks.

Liberal Democrat leader Ed Davey said: “This is a Conservative mortgage tax on millions of families. People are seeing their monthly mortgage payments go through the roof, all because the Conservatives lost control of inflation and the economy.

“While the banks need to step up and help, there isn’t a moment to lose for Rishi Sunak to guarantee help for homeowners facing repossession with a targeted Mortgage Rescue Fund. Every day that goes past means more families are at risk of losing their homes through no fault of their own.”

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