Ongoing interest rate rises over the last three years have seen 320,000 remortgagersand new mortgage holders pushed into poverty, says the Institute for Fiscal Studies.
The latest study by the thinktank looked at the eect of the Bank of England raising the base rate 14 times from 0.1% in December 2021 to 5.25% in August 2023, where it has remained.
The IFS report adds: “Despite the pandemic and the cost-of-living crisis, the overall rate of absolute poverty was the same in 2022–23 as in 2019–20, at 18%, or 12 million people…There was a significant increase in more direct measures of hardship.”
There was a rise in the proportion of working age adults who were unable to keep their home warm enough, with the figure increasing from 1.8 million to 4.6 million people (4% to 11%), between 2019-20 and 2022-23.
Over the same period, a growing number of people also reported being behind on bills, rising from 2.1 million to 2.5 million people (5% to 5%).
The thinktank says the number of people identified as being in poverty was understated by 70,000 due to a mismeasurement of mortgage interest payments in 2022-23. And based on December 2023 interest rates that number is set to rise to 150,000 as more fixed-term mortgages come to an end.
It points out: “Adults remortgaging in 2022 were 2 percentage points more likely to fall into arrears on bills than those with mortgages who had not remortgaged.
“This suggests that, once all households have remortgaged, the number of adults behind on bills could rise by 370,000.”
IFS research economist, Sam Ray-Chaudhuri, said: “Poverty rises have also been understated due to the unequal impact of inflation.
“At a time when rates of deprivation and food insecurity have risen substantially, poverty statistics that hide the real scale of these increases risk policymakers missing what is truly happening to poverty.”
Joseph Rowntree Foundation Chief Analyst, Peter Matejic, added: “One reason lower-income households went without essentials is because they faced a rate of inflation even higher than the headline numbers.
“High interest rates also saw many households forced into financial hardship after they remortgaged.”
