The National Institute of Economic and Social Research (NIESR) published a topical briefing on 2 December 2022 projecting the effect of the expected peak in Bank Rate on households with mortgages1. The institute estimates that nearly four million households will see higher monthly mortgage repayments as a result of the higher Bank Rate1.
NIESR puts the typical monthly repayment on a fixed-rate mortgage rising from around £700 to £1,100 on average, and from around £500 to £900 on average for those on a variable-rate mortgage, describing this as a 50 per cent increase1. The briefing extends earlier NIESR work on variable-rate households to cover those who need to re-mortgage their fixed-rate plan1.
"This £400 increase in monthly repayments will wipe out the savings of a further 1.4 million households by 2024 as a result of higher mortgage repayments"
The briefing states that the total number of households without savings will stand at around 7 million, or 1 in 4 (25 per cent)1. It adds that £1.2 billion per month, or £14 billion per year, will be spent on increased mortgage repayments, equal to 0.5 per cent of GDP1. The households NIESR expects to lose out the most are concentrated in the West Midlands, the North-West, Wales and Scotland1.
| Measure | NIESR projection |
|---|---|
| Households facing higher monthly repayments | Nearly 4 million1 |
| Typical fixed-rate repayment | Around £700 to £1,100 a month1 |
| Typical variable-rate repayment | Around £500 to £900 a month1 |
| Increase in monthly repayments | Around £400, a 50 per cent rise1 |
| Further households whose savings are wiped out by 2024 | 1.4 million1 |
| Total households without savings | Around 7 million (25 per cent)1 |
| Extra spending on mortgage repayments | £1.2 billion a month, £14 billion a year (0.5 per cent of GDP)1 |
Why it matters for households
The projections concern homeowners with a mortgage, and the timing differs by type of deal. Households on a variable rate are affected as Bank Rate rises, while those on a fixed rate are affected when their existing deal ends and they need to re-mortgage1. For a household moving from a typical fixed rate to the projected level, the monthly cost rises by around £400, from around £700 to around £1,1001. NIESR frames the savings effect as compounding an existing shock to real incomes during the cost-of-living crisis, with 1.4 million more households expected to have no savings by 2024 and around 7 million in total in that position1. The regional concentration of the households expected to lose out the most is in the West Midlands, the North-West, Wales and Scotland1. How a change in Bank Rate feeds through to repayments is set out in our guide to how a Bank Rate change affects your mortgage payments, and the wider picture is covered in Bank Rate, inflation and the UK economy. For background on how repayments are structured, see repayment mortgages explained, and for the aggregate figures, how much UK households owe.
What happens next
The briefing is a projection based on the expected peak in Bank Rate rather than an announcement of measures1. It does not set out a date for that peak, and no further steps by NIESR, the Bank of England or the government are reported in it1. The savings figures are projected to 20241.
MoneyHelperFree, impartial money and pensions guidance, set up by government
Citizens AdviceFree advice on money, consumer and legal problems in England and Wales
GOV.UKOfficial information on tax, benefits and government services
StepChangeFree debt advice and solutions from a charity
FSCSProtects your money if a bank, insurer or investment firm fails