By Suban Abdulla
LONDON (Reuters) - Some 1.6 million British households are yet to face a 2,300 pound surge ($2,903) on average when their fixed-rate mortgages roll over this year and next, a report from the REsolution Foundation showed on Saturday.
The think tank, which focuses on living standards, said only around half of the 7.5 million mortgagor households have so far seen a change in their mortgage rate after the Bank of England began raising interest rates in December 2021.
It said poorer and younger borrowers are set to be hardest hit by the BoE's interest rates hikes.
The BoE raised the Bank Rate to 4.5% from 4.25% last week in an effort to bring the highest inflation rate in Western Europe, running at 10.1% in March, back to its 2% target.
Far more homeowners are on fixed rate mortgages than in the past, meaning the impact of the BoE's increase in borrowing costs only feeds through once the term on these mortgages expires, with new deals fixed at a higher repayment rate.
Simon Pittaway, senior economist at the Resolution Foundation, said while the BoE's rate rise run could be nearing an end, the majority of households still face mortgage pain.
"Two thirds of the 12 billion pounds a year increase in mortgage costs that British households face as a result of rising rates is still to come," Pittaway said.
The Resolution Foundation estimates total annual loan bills have increased by 4.2 billion pounds since the BoE started increasing rates in December 2021.
It expects mortgage costs to jump by around 8 billion pounds in the coming years, with over 5 billion pounds coming through in 2024.
The think tank noted that more homeowners were opting for five-year fixed-rate deals, compared to two-year loans between 2016 and 2022 as households faced the sharpest interest rates rises in more than 30 years.
It calculated that fixed-term mortgages went from accounting for just 4 pounds of every 10 pounds lent before the global financial crisis, to over 9 pounds of every 10 pounds lent in last year.
With interest rates projected to peak at 5% and fall more slowly than they've risen, the Resolution Foundation expects mortgage costs to remain elevated for some time.
"Market prices suggest the average rate on new mortgages will remain above 4% until the end of 2026," the report said.
($1 = 0.7923 pounds)
(Reporting by Suban Abdulla, editing by Andy Bruce)