Rocketing mortgage rates set to hit households harder than in the 80s

ROCKETING mortgage rates will hit households harder than in the ’80s, swallowing more than half of wages by the year’s end, say experts.

Homeowners have seen hefty hikes to repayments, or will in months to come when their current deals end, figures show.

Around 4.2million households have already faced a £1,500 rise in their annual mortgage costs.

The current standard variable rate stands at a fraction below six per cent, which adds almost £3,000 to the average annual repayment.

Finance information firm Moneyfacts fears it could jump to 8.77 per cent next year.

That would depend on the Bank of England putting the base rate up to 5.75 per cent, which many experts believe will happen.

The Bank is expected to raise the rate from 4.5 to 4.75 per cent next week — the 13th increase in a row — as it tries to rein in inflation.

The feared increase next year would see an extra three per cent of a household budget go on mortgage costs.

In the 1980s, with homes cheaper and less debt, it was 2.4 per cent — despite mortgage rates peaking at nearly 15 per cent, says the Resolution Foundation think-tank.

The Government has urged banks to protect mortgage holders and Lib Dem leader Sir Ed Davey has called for a £3billion fund to cushion those facing possible repossession.

It comes as public confidence in the Bank of England to control inflation has hit an all-time low.