Sir Keir Starmer has renewed calls for Liz Truss to reverse her “kamikaze” budget as he warned families face “eye-watering” mortgage increases.
Analysis by the Labour Party suggests an average UK buyer coming off a two-year fixed mortgage could experience a £498 monthly hike if interest rates hit 6%.
Labour has developed estimates based on the assumption that a homeowner has a 20-year mortgage term and they pay a 5% or 6% interest rate once their two-year fix ends in the third quarter of 2022.
Those in London would be the worst hit, with Labour’s estimates putting the monthly increase at between £689 and £915, while the party suggests homeowners in the North East would experience a predicted increase of between £247 to £327.
There is an expectation that the Bank of England might step in with another interest rate rise in the weeks to come, following Chancellor Kwasi Kwarteng’s mini-budget last month, in order to further calm the markets.
Such a move would only add further pressure to homeowners and those trying to buy a house.
Prime Minister Ms Truss and Mr Kwarteng have come under fire in recent days for the market turmoil which erupted after the Government announced a £45 billion package of unfunded tax cuts alongside the commitment to cap energy bills for the next two years.
The Chancellor later dropped plans to abolish the 45% tax rate on earnings over £150,000, although remains committed to the rest of his mini-Budget.
Labour leader Sir Keir said: “These eye-watering mortgage increases will cause homeowners across the country sleepless nights – and the Tory Government is entirely to blame.
“Liz Truss and Kwasi Kwarteng crashed the economy with their attempts to hand enormous, unfunded tax cuts to those who least need it.
“The humiliating U-turn they were forced into came too late – the damage had been done. Now we are all suffering the consequences. This was a crisis made in Downing Street but paid by working people.
“The Prime Minister must reverse her kamikaze budget, including her totally unfunded £17 billion corporation tax giveaway to the biggest companies. The burden of the Tories’ fantasy economics should not fall on working people.”
On Wednesday, the average two-year fixed-rate mortgage on the market breached 6% for the first time since 2008.
Across all deposit sizes, a typical two-year fix stood at 6.07% on Wednesday, creeping up from 5.97% on Tuesday, Moneyfacts.co.uk said.
In December last year, the average two-year fix was 2.34%. Based on someone having a £200,000 mortgage paid back over 25 years, their average monthly payments at that rate could have been £881.20, Moneyfacts calculated.
But based on current average rates, they could face paying £1,297.17 per month – a difference of nearly £416 or nearly £5,000 per year.
A Government spokesman said: “There are a range of factors affecting mortgage and interest rates, which have been rising internationally in response to global trends including Putin’s illegal invasion of Ukraine.
“The Government is doing what it can to support people with rising costs – our energy price guarantee will save the typical household around £1,000 a year and we are providing payments of £1,200 to the eight million most vulnerable families.
“This support is in addition to the Chancellor’s growth plan, which brought forward the cut to the basic rate of income tax and reversed the national insurance rise, putting hundreds of pounds on average back in the pockets of working people.”