Since interest rate hikes in 2022, thousands of households remortgaging have experienced significant income drops, pushing them towards poverty. The Institute for Fiscal Studies (IFS) reported that 320,000 mortgage holders are now in poverty.
However, government statistics suggest that 230,000 people are in severe financial distress. With interest rates at 5.25% in December 2023, the IFS predicted an additional 150,000 people were pushed into poverty, previously estimated at 70,000. Remortgaged households are 2% more likely to fall behind on bills than those who did not remortgage in 2022.
The IFS warned that once all households have remortgaged, the number of people falling behind on bills could rise to 730,000. Before the pandemic, 12 million people (18% of the population) were in poverty, which increased by 520,000 between 2021 and 2023. However, these figures do not account for the financially distressed, with up to 4.6m struggling to heat their homes and 2.5m reporting significant bill increases.
The IFS highlighted that higher energy and food prices disproportionately affect lower-income households and pensioners, leading to a higher inflation rate for these groups than average. As a result, the actual number of people experiencing poverty after the pandemic has increased by 730,000, including 80,000 pensioners.
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