Budget Branded "Disastrous" as Mortgage Costs Could Rise for Middle-Class Families

The Budget's Impact on Mortgages

The Chancellor's Budget has been met with criticism, with claims that it could lead to higher mortgage costs for middle-class families. The Office of Budget Responsibility (OBR) has revised its forecast for mortgage rates, predicting an increase from 3.8% to 3.9% in the first quarter of 2025. This change could translate to an additional £1,019 per year for a middle-class family with a £377,000 mortgage on a detached property.

The analysis focuses on five-year fixed-rate mortgages, the most common type of home loan in the UK. If a family renews their mortgage in 2025, the additional cost could be even higher, reaching £3,538. Shadow Chancellor Mel Stride has criticized the Budget, calling it "disastrous" and claiming that it will lead to higher interest rates and punish mortgage holders.

In response, the Chancellor has stated that she will "take action" to meet her fiscal rules, despite concerns about rising government borrowing costs. She has declined to comment on market volatility but has insisted that her fiscal rules are non-negotiable. However, experts warn that higher gilt yields could lead to increased government spending on debt interest, requiring tax increases or spending cuts to cover the costs.

The Treasury has defended the Budget, stating that average mortgage rates are lower now than they were at the time of the election. They also point out that someone with a £215,000 mortgage is paying £40 less per month than they were before the election. However, critics argue that these figures do not take into account the potential impact of rising interest rates in the future.