Soaring Mortgage Rates Drive 320,000 Britons into Poverty

Rising mortgage rates in Britain have likely pushed around 320,000 people into poverty, surpassing previous official estimates. The Institute for Fiscal Studies report highlights the severe impact of borrowing costs, which affects more households than initially believed. Disproportionate inflation rates among different income groups further exacerbate this issue.

A surge in mortgage rates across Britain has likely driven approximately 320,000 people into poverty, according to a recent report released on Thursday. This figure is nearly 100,000 higher than what official statistics suggest. Although rates have decreased from peaks above 6% for a standard two-year mortgage last year, they remain over 5% — significantly higher than pre-2022 levels when interest rates began to rise sharply.

The report, funded by the Joseph Rowntree Foundation and conducted by the Institute for Fiscal Studies (IFS), reveals that the rise in borrowing costs has impacted more individuals than initially assumed, due to limitations in official household income data. This data applies a single average interest rate for all households, leading to an understated number of people in poverty. Sam Ray-Chaudhuri, a research economist at IFS, stated that next year's data might reveal even higher poverty rates due to this discrepancy and the unequal impact of inflation.

According to the Office for National Statistics, inflation peaked at 14.3% for households in the bottom income decile, compared to 11.3% for those in the highest income bracket, further exacerbating the economic strain on lower-income households.

(With inputs from agencies.)