Homeowners with £300,000 mortgage could see annual payments rise by £13,200 by end of year

15 June 2023, 00:30

It comes amid predictions that the Bank of England’s interest rate could hit 6 per cent
It comes amid predictions that the Bank of England’s interest rate could hit 6 per cent. Picture: Getty/Bank of England
Kieran Kelly

By Kieran Kelly

Homeowners with a £300,000 mortgage face an annual increase of £13,200 in mortgage payments by the end of 2023, new analysis shows.

Mortgage lenders have been raising their rates - with some even withdrawing entire deals - as more predictions come in that the Bank of England could hike interest rates to six per cent by the end of the year.

On Tuesday, HSBC withdrew one of its mortgage offers from the market - the second time the banking giant has done so in a week, with subsequent deals offering higher rates.

Meanwhile, Coventry building society said it plans to suspend residential and buy-to-let deals.

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It comes amid warnings from the Chancellor Jeremy Hunt that interest rates must rise if it means bringing down inflation, suggesting.

There is "no alternative", Mr Hunt said.

He added that the government would support the Bank of England in doing what is needed to tame inflation, which is the "number one challenge" facing the UK.

Chancellor Jeremy Hunt
Chancellor Jeremy Hunt. Picture: Getty

Mr Hunt said: "We understand there is real pressure on families with mortgages, on businesses with loans, as interest rates go up.

"In the end there is no alternative to bringing down inflation if we want to see consumers spending, if we want to see businesses investing, if we want to see long-term growth and prosperity."

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Interest rate rises
Interest rate rises. Picture: Bank of England

Another interest rate rise by the Bank of England is expected, with the figure currently standing at 4.5 per cent.

Research by broker broker L&C Mortgages shows that rate rises have already added £9,564 a year for homeowners with a standard variable rate mortgage of £300,000.

Increasing interest rates to six per cent would mean homeowners with a SVR mortgage of £300,000 face paying an extra £1,103 a month compared to 18 months ago.

Lord Mervyn King says it ‘may not be compatible’ to both halve inflation & avoid recession.

It comes after the former Governor of the Bank of England Mervyn King told LBC that the "stickier that inflation seems to be", central banks - including the Bank of England - may be forced into taking "tougher action" to bring it back down.

As for how Rishi Sunak, who has promised to halve inflation in his five pledges, can take credit for falling inflation, Mr King said "it's convenient" but "not a bad thing to claim credit for" if there is confidence it will drop.

"I think it's going to be probably not wise to do so," Mr King told Andrew.

"If you think that the high energy and food prices of last year are going to drop out of the measure of inflation...it's convenient - it's something that happens.

"But if you are confident it will happen, it's not a bad thing to claim credit for when it's actually got nothing to do with you at all."

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Mr King also warned that it may not be "compatible" to halve inflation and avoid a recession.

Mr Hunt has already signalled that he would be comfortable seeing the UK enter a recession if it meant bringing down inflation.