London: A recent report highlights that rising mortgage rates in the UK have likely driven approximately 320,000 individuals into poverty, nearly 100,000 more than previously estimated by official statistics. Despite a reduction from last year’s peak rates above 6% for a typical two-year mortgage, current rates remain above 5%, significantly higher than pre-2022 levels.
The Institute for Fiscal Studies (IFS), supported by the Joseph Rowntree Foundation, released the report, revealing that the impact of increased borrowing costs has been more severe than anticipated. The discrepancy arises from limitations in official household income data, which applies a single average interest rate to all households.
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“This has led to the headline statistics understating the number of people in poverty, something set to get worse in next year’s data,” said Sam Ray-Chaudhuri, research economist at the IFS. “Poverty rises have also been understated due to the unequal impact of inflation,” he added.
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Data from the Office for National Statistics shows inflation peaked at 14.3% for households in the lowest income decile, compared to 11.3% for those in the highest income bracket.
