Reeves’ ‘disastrous’ Budget to add more than £1,000 to mortgages

Rachel Reeves’ “disastrous” Budget is set to add over £1,000 to a middle-class family’s mortgage, a Telegraph analysis has found.

Before the Chancellor’s maiden Budget, the Office for Budget Responsibility’s (OBR) forecast found that mortgage rates would be at 3.8 per cent for the first quarter of 2025.

However, in their updated forecast, published on the day of her October Budget to take into account her tax and spending measures, the fiscal watchdog said that mortgage rates would be at 3.9 per cent for the same period.

This means that property owners needing to remortgage their home at the start of this year will now be paying an additional £1,019 compared to what they would have paid before Ms Reeves’ Budget.

This increase applies to a typical middle-class family living in an average-priced detached family home which is worth £443,974 according to the Land Registry. With a typical 15 per cent deposit, this would mean taking out a loan of £377,000.

It is based on a five-year fixed repayment mortgage, which the Bank of England said makes up the majority of UK mortgages.

For a middle-class family with a five-year variable mortgage, the price of renewing their mortgage this year would be even higher, at £3,538.

Mel Stride, the shadow chancellor, attacked Ms Reeves for her “disastrous” Budget, adding: “This latest disturbing analysis once again illustrates that Rachel Reeves’ Budget is completely unfit for purpose.

“Far from promoting growth and higher living standards, her decisions are destroying growth, pushing up inflation and seeing interest rates higher for longer, severely punishing mortgage holders along the way.

“Rather than jetting off to China, the Chancellor should be here to at least start sorting out the mess for which she alone is responsible.”

Carl Emmerson, deputy director at the Institute for Fiscal Studies, said higher gilt yields “will push up government spending on debt interest”. He added that resulting tax rises or spending cuts to cover that “would likely be backloaded”.

Mr Emmerson said: “A more immediate adverse impact will be felt by those who have to remortgage, for whom mortgage rates may well not be as attractive as they were looking just a week ago.”

For a property owner living in an average-sized home, with a five-year fixed £200,000 repayment mortgage, they would face paying an extra £541 compared to what it would have been before Ms Reeves’ Budget. On a variable mortgage over the same time period, this rises to an extra £1,875.

The Chancellor has come under pressure in recent days after it emerged that one pound in every four of the £40 billion in tax rises Ms Reeves imposed in autumn has been swallowed up by extra borrowing costs as international investors fret over the scale of government debt.

The Telegraph has previously revealed that middle-class families face an £8,000 increase in their tax bills in 2025.

A raft of Labour tax rises will come into force next year, meaning households will pay thousands more in taxes from their children’s education to council tax.

Ms Reeves, who increased taxes by £40 billion when she delivered her maiden Budget, has also refused to rule out further raids next year.

A Treasury spokesman said: “Economic stability is the foundation of our Plan for Change. The average two-year and five-year fixed mortgage rates are lower now than they were at the election and someone on a £215,000 mortgage, with a 29-year term length, is paying £40 a month less than they were at the time of the election – or £480 a year.”

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