The number of homeowners forced to sell up is forecast to rise by half in the coming months amid an affordability emergency triggered by rising interest rates.
Repossessions will surge as borrowers struggle to afford higher mortgage payments, experts have warned, with almost 4,000 people at risk of losing their home by the end of July.
The Bank of England has raised interest rates by 0.25 percentage points from 0.75pc to 1pc, its fourth consecutive increase. Interest rates are now the highest they have been for 13 years.
During the last rate raise cycle, which pushed the Bank Rate from 0.25pc to 0.75pc between 2017 and 2018, repossessions rose by a quarter, according to analysis by the Centre for Economics and Business Research, a consultancy.
The economic fallout is expected to be worse on this occasion, because the Bank Rate has risen at a much steeper rate of 0.9 percentage points in less than a year, up from 0.1pc in December to the current 1pc.
The CEBR forecasts repossessions will rise by between 40pc and 50pc this summer, equal to almost 4,000 borrowers losing their homes every three months. If the Bank Rate climbs to 2pc by the end of this year, repossessions could double.
Kay Neufeld, of the CEBR, said: “We are not in completely unprecedented territory, but we haven’t seen rate rises like this in a long time and households are facing cost pressures on all sides.”
Inflation will surge to more than 10pc this year, its highest level since 1982, and serve the financial biggest blow to households in a generation. Millions have already seen huge jumps in their food and energy prices, whilst analysts have predicted the biggest drop in consumer incomes on record.
“For many households higher interest rates will be the straw that breaks the camel’s back. It really doesn’t bode well for the summer,” said Mr Neufeld.
Whilst the Bank Rate remains lower than in previous crises, affordability is already at an all-time low.
Buyers now need 7.7 times their income to afford the average home, according to analysts Capital Economics, more than the previous peak of 7.5 needed before the financial crisis.
The affordability crisis has so far been masked by record-low mortgage rates, but that is about to change.
Banks and building societies will be quick to pass on higher interest rates to customers, with borrowers on variable-rate mortgages, of which there are roughly two million in Britain, and those looking to remortgage worst hit.
Mortgage rates are already higher than those in the middle of the previous rate rise cycle five years ago. The average two-year fixed rate is currently 3.03pc, compared to 2.3pc in May 2017, according to analyst Moneyfacts. Meanwhile the average five-year rate is priced at 3.17pc, up from 2.89pc in the same month five years ago.
Sue Anderson, of Step Change, the debt charity, said: “The rate rise will be felt most acutely in mortgage costs, so we would expect to see some increased pressure emerging on home owner’s finances as the year goes on.
“Some may be pushed to further borrowing to cover their costs and, if rates rise further, result in higher mortgage arrears and more debt problems.”