Young and middle income mortgage holders will feel biggest short-term pressure on mortgage costs 2 November 2017 Barely one in ten families are at risk of an overnight effect of today’s rate rise through higher mortgage costs, with young and middle income mortgage owners facing the biggest cost increases, the Resolution Foundation said today in response to the Bank’s decision to raise interest rates by 0.25ppts. The Foundation’s analysis finds that the combination of falling homeownership, a falling share of homeowners with mortgages, and a falling share of mortgagors on variable rates mean that barely one in ten families (11%) are likely to be affected in the short term by today’s rate rise in terms of higher mortgage costs – down from 19% a decade ago. Families aged 45-54 (19%), and those living in the East and West Midlands (14% and 13% respectively) are most likely to be on a variable rate mortgages and face overnight cost increases. Looking at the scale of potential increases in mortgage costs, the Foundation finds that the average increase for variable rate mortgage holders of a 0.25ppt rate rise is £6.40 a month (or 1.3%). Although there are less of them, young variable rate mortgage owners (aged 18-24) will face the biggest cost increases (2.6%), along with those on middle incomes (2%) and those living in the South West (2.5%). Looking ahead to a future scenario in which mortgage rates rise by 1ppt, the Foundation’s analysis finds that young households with mortgages (aged 18-24) would face the biggest cost increases (8% or £31.40 a month), along with middle income mortgage owners (7.9%). Matt Whittaker, Chief Economist at the Resolution Foundation, said: “The big changes that have taken place in our housing market over the last decade mean that barely one in ten families are at risk of seeing the overnight effect of today’s interest rate decision through higher mortgage costs. “For most homeowners the effect of today’s rise will be modest or negligible, though younger home-owners and those on middle incomes will face the biggest effects. “Should interest rates continue to rise over the coming years, the effect on mortgage holders will be far more significant. But prospects for future rises remain highly uncertain, particularly given the lack of firm evidence that wages are rising sustainably.”