£5,000 annually.. A new crisis facing mortgage holders in Britain

Britain's mortgage underwriters face a "dramatic" rise in costs that would outpace even the energy bills crisis, Rishi Sunak's government has warned.

Mortgage

Tory MPs are increasingly concerned that the mortgage time bomb will cost them their seats, with new research showing many in the 'blue wall' southeast of England face a £5,000 a year increase in payments.

It comes as Labor enjoys another surge in the polls, with signs Sir Keir Starmer's party is enjoying a huge surge of support from worried homeowners.

London mortgages

Research by Public First advisory firm shows that those with average mortgages in London and the South East could see mortgage costs rise by £5,000 or more per year compared to 2020-2021.

The findings, shared for the first time with The Observer, show Brits under 45 could see their annual costs increase by more than £4,000, because interest payments make up a larger proportion of their mortgage.

Public First's Rachel Wolfe, co-author of the 2019 Conservative Party manifesto, said: "The consequence of continued rising house prices, particularly for millennials and those in the more affordable south-east, will be devastatingly evident in the year ahead.

 "With the end of low interest rates, the parts of central Britain that have yet to retire will suffer in a way that dwarfs the energy bill crisis for them," she added.

Labor and the mortgage crisis

Labor now has a 31-point lead over the Conservatives among mortgage holders, according to a new poll by The Observer newspaper, rising from 44 per cent to 53 per cent.

While the Opinium poll showed a six-point swing to Labor, increasingly ahead to 18 points, the latest YouGov poll showed Labor gaining 25 points after boosting by six points.

James Johnson of JL Partners, former No. 10 pollster, said he "confirms that Labor's lead has stretched significantly over the past 10 days or so" - saying Rishi Sunak's recent clashes with Boris Johnson, as well as the mortgage crisis, It was a major factor.

Interest rates

Chancellor Jeremy Hunt urged cash-strapped Britons to be patient with “painful” interest rate increases, stressing that the increases were “one of the most effective ways” to crush stubborn inflation.

Hunt has agreed a plan with banks to offer more flexibility over interest-only mortgage holidays, a 12-month grace period for redemption and a guarantee that credit scores will not be affected by the switch to the temporary subsidy.

But senior Tory MPs also urged the government to go further – telling The Independent that many “panicking” backbenchers fear that the mortgage crisis will lead to a general election wipe-out.

One said the government would have to offer more help in the months ahead, suggesting “more generous” loans to cover mortgage interest payments for Universal Credit recipients. “What do we do for people who lose their job? We need to be more helpful,” they said.

Plan to curb inflation

During his interview with the BBC on Sunday with Britain's Laura Kuensberg, Sunak spoke of raising interest rates - claiming it was "no substitute" for his plan to stamp out inflation.

The prime minister said “inflation is the enemy” as he defended the Bank of England’s decision to raise interest rates to a 15-year high by 5 per cent last week, adding pressure on mortgage holders.

Giving support to embattled Governor Andrew Bailey, he said: "The Bank of England's record – including the portfolios' performance record – over a long period of time is that inflation has been appropriately managed...and the BoE has my full support."