The increase in mortgage rates over the last year could cost UK households £9bn over this year and next, according to the Centre for Economics and Business Research.

The Cebr added that borrowers in London and the South East are set to experience the sharpest rises.

And the rate hikes may not be over yet.

With the Bank of England now more likely to raise rates even higher than previously thought, the Cebr said it expects the average two-year (75% LTV) mortgage rate to rise to 5.1% in 2023.

The Centre analysed the impact of rising mortgage rates across the UK’s regions, based on Office for National Statistics’ estimates of 2.5 million mortgage deals that are set to mature this year and next.

These households will be exposed to the recent rise in rates, on top of the estimated one million that have already seen their mortgage rate rise.

Hike in mortgage bills

Assuming that mortgage rates average 5.1% in 2023 and 4.6% in 2024, Cebr estimates that mortgage holders looking to renegotiate their deal in the next two years will face a hefty £8.7 billion increase in total payments.

London will see the largest rise in cost, with mortgage costs up by £1.8 billion over 2023 and 2024, because of its higher property prices, followed by the South East which will see a £1.7bn rise in payments this year.

In London house prices are now 12 times average earnings and, in the South East 11 times earnings.

Northern Ireland and the North East are expected to see the lowest increase in mortgage payments for those due to refix up to the end of 2024, at £126m and £159m respectively.

Strain ‘yet to be fully felt’

Cebr also suggested that a substantial strain on incomes is ‘yet to be fully felt’. It explained that the impact on households of the rate rises is only just beginning and could stretch well into 2024.