Growing numbers of Scottish homeowners are falling behind on their mortgage payments as the bill for the Bank of England’s tighter monetary policy heads into many billions of pounds.
According to figures issued in June by the Centre for Economics and Business Research, UK homeowners are set to spend an alarming £9 billion more purely on rising interest rates throughout this year and into 2024. It comes as mortgage costs have reached their highest level in 15 years with the interest rate on the average two-year fixed deal hitting 6.66% earlier this month – a level not seen since August 2008.
Mortgage holders have always been in the minority of those seeking advice on handling debt, so it’s significant that StepChange Scotland has today reported an increase in the proportion of its clients who are in the process of buying their home. The year-on-year increase from 13% to 15% might not sound particularly dramatic, but it is substantive given that the number of people seeking help overall has surged amid mounting pressure from the cost-of-living crisis.
READ MORE: The rising cost of UK mortgage repayments explained
During the second quarter of this year, 19% of StepChange clients in Scotland who had a mortgage were behind on those payments, up from 15% in the second quarter of 2022. This trend looks set to continue as more and more mortgage holders come off fixed-rate deals in the coming year.
Furthermore, there’s little reason to believe that the Bank of England’s Monetary Policy Committee (MPC) is done when it comes to pushing up the cost of borrowing money. Latest inflation figures to be released tomorrow are expected to keep pressure on the BoE to raise rates again in what currently stands at 13 consecutive months of monetary tightening.
READ MORE: Easing pay pressure will not halt rising interest rates
A survey of economists by Bloomberg is predicting Consumer Price Inflation will fall from 8.7% in May from to 8.2% in June, its lowest level since March of last year. However, core inflation is forecast to remain stubbornly stuck at a 31-year high of 7.1%.
Andrew Bailey, Governor of the BoE, has fretted loudly and at length about the dangers of a wage-price spiral taking hold in the UK as workers seeking to keep up with surging food and energy costs push for higher wages which in turn embeds inflation into the domestic economy. This is reflected in that core inflation figure which, if unmoved, all but guarantees a further hike in interest rates.
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