Average new mortgage bills up more than £500 a month in wake of mini-Budget, Labour claim

Estimated 113,000 households had to renegotiate rates before U-turn on Kwarteng package

Families who renegotiated their mortgage in the weeks after former chancellor Kwasi Kwarteng’s mini-Budget will be paying an average of over £500 more on monthly bills due to higher interest rates, Labour has said.

Interest rates spiked in the wake of the 23 September announcement of £45bn of unfunded tax giveaways going predominantly to the rich, the bulk of which were reversed within the following weeks by prime minister Liz Truss and new chancellor Jeremy Hunt.

But Labour said that in the period before the U-turns, an estimated 113,000 households will have had to remortgage their homes at disadvantageous prices as their fixed-rate deals came up for renewal.

Analysis by the party found that households moving onto an average mortgage deal on the day Ms Truss announced her resignation last Thursday will be paying £537 a month more than they had the year before.

They face a total of £13,000 in extra payments over the coming two years, compared to previous years, said shadow levelling up secretary Lisa Nandy.

While some of the interest rate increases imposed by the Bank of England were the result of difficult global economic conditions in the wake of Covid and the Ukraine war, Ms Nandy said that part of the rise could be blamed on the Tories’ mismanagement of the economy.

On Thursday, when Ms Truss announced she would step down, monthly interest rates for two-year fixed-term mortgages stood at 6.65 per cent, compared to 2.25 per cent on 22 October 2021. 

Meanwhile, the 23-day delay before Mr Hunt undid large parts of the mini-Budget meant that an estimated 113,000 people were forced to remortgage during a period of economic turmoil.

Ms Nandy said: “This is a Tory crisis, made in Downing Street and being paid for by working people. Tens of thousands of households will be paying higher mortgage bills for years to come because the Conservatives crashed the economy.

“Despite the U-turns, the damage has been done. Even now, families are still paying more because the government has lost all credibility. 

“The Tories simply cannot be trusted with the economy. Only Labour offers the leadership and ideas to get Britain out of this mess which is why we need a general election now.”