Homeowners and renters face 'huge' interest rate shock says Barclays chief

UK homeowners and renters are facing a "huge income shock" as rising interest rates hit mortgages and monthly costs, the boss of Barclays has warned.

CS Venkatakrishnan, who is known as Venkat, estimates that payments by mortgage holders and tenants will take a chunk of between 28% and 30% out of their income.

He said that compares to an average 20% in previous years.

The Bank of England has sharply raised interest rates to curb inflation.

The typical UK mortgage is a two-year fixed-rate deal.

The Barclays boss said that "most people will begin to feel the impact of higher rates when their current deal expires by the end of next year", and predicted "there is a huge income shock" on the way.

Mr Venkat was speaking to a conference held by the Wall Street Journal.

Around 85% of all mortgages are fixed-rate, according to the Bank of England.

It said around 1.3 million households are expected to reach the end of their deals this year and face a rise of up to £200 per month, based on current rates.

The Bank of England has raised interest rates 12 times since December 2021 in an attempt to keep price rises, or inflation, under control.

A typical tracker mortgage customer is now paying about £417 more a month while those on a variable rate have seen their costs rise by £266.

Data released on Wednesday shows inflation slowed to 8.7% in the year to April but remains higher than some economists predicted.

It has prompted expectations of a further increase in borrowing costs when the Bank of England's rate-setting Monetary Policy Committee (MPC) meets in June.

Andrew Montlake, managing director at mortgage brokers Coreco, said: "While on the face of it we have seen a fall in inflation back down to single figures, it is not by quite as much as expected.

He added: "What is more, the important underlying inflation figure has proved to be stickier than envisaged. This has led to a reaction from the markets as they believe the Bank of England may now continue with their policy of rate rises."

Sushil Wadhwani, a former member of the MPC who is now on Chancellor Jeremy Hunt's Economic Advisory Council, said markets have indicated interest rates could peak around 5.5%.

He said a lot people are on fixed rate mortgages "and these haven't adjusted yet".

"That's an adjustment that's yet to come and it's deeply worrying for all of us," he added.