“Average mortgage payments will be going up by a crippling £2,900 this year, so where does the Chancellor think families will get the money to pay the Tory mortgage penalty?”
In Parliament last week, shadow chancellor Rachel Reeves claimed that “average mortgage payments” will be increasing by “£2,900 this year”.
She repeated this again in Parliament this week, saying “millions” of homeowners “face an average increase in mortgage costs of £2,900 this year”.
This figure has also been used in a slightly less specific way by Labour leader Sir Keir Starmer twice at Prime Minister’s Questions, and it appeared in a Labour press release (not published online), which stated that “average mortgage costs will be going up by a crippling £2,900 per year”, citing analysis published by the Resolution Foundation think tank.
When Full Fact asked Labour about Ms Reeves’ comments, we did not receive a response, but it appears likely she was also quoting the same Resolution Foundation figure. If so, there are two problems with her claims.
The Resolution Foundation analysis makes clear that the £2,900 figure actually refers to the estimated average annual increase in repayments for households whose current fixed-rate mortgage deal expires in 2024, assuming they go on to remortgage on another fixed deal of a similar length. (This is also how the analysis was widely reported when it first came out earlier this month).
That means it’s not really an estimate for the amount mortgages will increase by “this year”—although the Resolution Foundation did tell us it estimates the annual increase for households with fixed-rate mortgage deals expiring this year would be only slightly lower, at £2,800.
And it’s not an estimate for the increase in “average mortgage repayments” across all mortgages, which might have been assumed because Labour gave no indication that the figure concerns only mortgage holders with a fixed-rate deal expiring in 2024. It does not consider how payments may change for the millions of mortgage holders with fixed-rate mortgages which expire in a different year, or those on variable-rate or tracker mortgages.
According to the Resolution Foundation, approximately 1.8 million fixed-rate mortgage holders have deals which expire in 2023, while a further 1.7 million fixed-rate mortgages expire in 2024. Together, it says this accounts for just under half of the almost 7.5 million mortgage holders in the UK whose mortgage payments are set to increase between 2021 and 2026.
The £2,900 figure quoted by Labour does not include those on variable-rate or tracker mortgages—deals that don’t have a fixed interest rate, and so are more immediately affected by the Bank of England’s rate changes. (The Resolution Foundation estimates around 1.7 million homeowners had these kinds of mortgages when interest rates first began increasing at the end of 2019, though it’s possible some may since have switched to fixed rate deals.)
The Resolution Foundation told Full Fact it could not produce an estimate for how these types of mortgages might change over the course of this year, but projects they will also face “significantly higher repayments”, with interest rates for floating rate mortgages currently predicted to peak in 2024 at a higher level than 2- and 5-year fixed rate deals.
The £2,900 figure also doesn’t cover homeowners with ongoing fixed-rate mortgage deals past 2024, who won’t see any change in their monthly payment until their fixed deal expires.
We’ve not been able to find any reliable estimates for how average mortgage payments across all mortgages may change in 2023. But the Resolution Foundation does project that by the end of 2026, almost all British households with a mortgage will have moved on to a higher rate, and it estimates they will end up with annual mortgage bills that are £2,000 higher on average compared to December 2021.
It’s important to note that all these figures are forward-looking predictions based on modelling, and are also average estimates. The amount by which individual households’ mortgage repayments will actually increase depends on a variety of factors, including the size of their outstanding mortgage, the type of deal they’re on, and when exactly they renew their mortgage.
Using statistics without appropriate context and caveats can damage public trust in both the statistics and politicians. MPs should use data transparently and with all relevant context and caveats when a claim is first made, and quickly rectify oversights when they occur.
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