Mortgage rises blamed for slump

The high street spending slump is due partly to a sharp rise in mortgage repayments, experts warned today.

Large numbers of homeowners are now facing spiralling mortgage costs as their cheap fixed-rate periods come to an end. Jonathan Loynes, Chief UK Economist at Capital Economics, said things will only get worse for the high street as a result.p

"A large number of home buyers took out two-year fixed-rate mortgages in 2003 at rates that were as low as 4 per cent," he said.

"These deals are now expiring and many of the borrowers are finding themselves paying their lender's standard variable mortgage (SVR) rate, which currently stands at around 6.75 per cent. This can mean a massive increase of around 24 per cent in monthly repayments."

Up to 90,000 households saw their two-year fixed-rate mortgages expire in the first three months of this year, according to Capital Economics. A further 600,000 are expected to be affected by the end of 2005.

The high street is experiencing its worst six months for a decade, with profit warnings and poor results already hitting Marks & Spencer, HMV and JJB Sports.