According to the Office for Budget Responsibility’s economic and fiscal outlook, which is published at the same time as the Autumn Statement, the average interest rates on the stock of outstanding mortgages will peak at 5% in the second half of 2024.

The OBR said that this is the highest since 2008 and 1.8% above the peak in its March forecast.

The OBR said that due to the large share of fixed-rate mortgages, around 83% in the second quarter of 2022, higher rates of new mortgages would “take time to feed through to higher average mortgage rates on the stock of debt”.

Base rate will peak at 5% in 2023

The OBR continued that market expectations underpinning its forecast pointed to the Bank of England base rate rising to 5% in a “short-lived peak” in the second half of next year.

It added that the peak for base rate is lower than immediately after the mini Budget, when the peak was predicted to reach 6.2%.

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“Our forecast continues to be conditioned on market expectations for base rate and not the materially lower expectations recorded in surveys of economists,” it said.

Inflation mitigated by energy price guarantee

The OBR added that it expected inflation to peak at a 40-year high of 11.1% in Q4 of this year.

It said that the peak would have been higher at 13.6%, and come in Q1 next year, if the energy price guarantee had not been in place.

It said that the energy price guarantee would hold inflation down next year, though the predicted increase from £2,500 to £3,000 in April next year would add 1% to quarterly CPI inflation in the second quarter of next year.