An additional 400,000 people are set to be pulled into poverty by high mortgage rates, a think tank has warned.
New analysis from the Joseph Roundtree Foundation (JRF) using a mortgage interest rate of 5.5% calculated that an additional 120,000 households – or 400,000 people – will be pulled into poverty over the coming year.
It also found that 750,000 households (2.4 million people) buying with a mortgage currently live in poverty.
The poverty rate for households buying with a mortgage would increase from 10% in 2020/21 to 12%, according to the think tank. This is the highest the poverty rate has been for this group in a decade.
These households would see their monthly housing costs increase to 54% of monthly income, over half their income, up from 38%.
Darren Baxter-Clow, senior policy adviser at JRF, commented: ‘The Government should rightly be concerned about the looming mortgage crisis and the crisis already being faced by private renters. Support must be targeted at mortgage holders in poverty and those who could be pulled into poverty by their housing costs who risk losing their homes, along with private renters who are already facing rapidly rising costs.
‘However, any support must not just prop up a broken housing market. Exorbitant house prices have shut millions out of homeownership for decades and trapped too many in an unaffordable, insecure, and poor quality private rented sector. Any crisis support must end the current cycle of boom and bust and work towards a healthier and more equitable housing system.’
