Over the past year, families with mortgages in Britain have experienced the most significant increase in living costs compared to other households due to sustained high interest rates.
According to the Office for National Statistics, living expenses for those with mortgages rose by 3.7% in the year up to June, while the overall increase for all households was 2.5%.
In contrast, homeowners without mortgages saw their living costs go up by only 1.3% over the same period. Private renters faced a 3.2% rise in living costs, while social renters experienced a 1.9% increase.
Inflation has generally decreased for all types of households, indicating that while prices continue to rise, the rate of increase is slowing. A year ago, in June 2023, overall living costs had surged by nearly 10%, with mortgage holders facing the steepest rise at 11.1%.
This spike followed the Bank of England’s significant interest rate hike from a historic low of 0.1% during the pandemic to 5.25% by August. Recently, the Bank’s Monetary Policy Committee, led by Governor Andrew Bailey, reduced the base rate to 5% this month.
The average interest rate on new mortgages in June was 4.82%, up from 1.5% before the rate hikes began. Consequently, the average monthly mortgage payment increased from £718 to £942.
In comparison, retired households saw a 1.2% rise in living costs, while non-retired households experienced a 2.9% increase.
