A new report, using anonymised current account data from NatWest Group on 15,000 mortgage holders and 1,500 renters, shows that those with the lowest incomes were disproportionately affected by soaring rates.

According to The impact of Bank Rate rises on consumer finances in Scotland, one of the most direct impacts of interest rate changes was on mortgage repayments. While mortgage rates remained constant between 2019 and 2022, from early 2022 until July 2024 they rose by an average of 20%.

However, the picture was very different for renters, with their average housing costs remaining broadly unchanged since 2019, possibly due in part to the Scottish Government’s rent cap.

Between January 2022 and July 2024, the report shows that mortgage holders saw an average three-point rise in housing costs as a percentage of income (from 13.5 to 16.5%), with average four-week mortgage costs rising from around £650 to £790, while average renters’ costs remained steady at around 11% of income or approximately £280.

For mortgage holders on low incomes (less than £20,600 a year), not only do housing costs represent a much larger fraction of their income in the first place, but this fraction also increased more rapidly over the same period, by nine points, from 32 to 41% of income, £370 to £470.  

While the discretionary spending habits of mortgage holders and renters continued to rise over time, the data shows that low-income mortgage holders were left with restricted discretionary spending power during and after the COVID-19 pandemic.

Dr Nathan Bourne of Smart Data Foundry, who led the research, said: “This sample of NatWest Group current account data allows us to look at the impacts on different sections of society.

“While it’s no surprise that mortgage holders on low incomes are particularly susceptible to changes in rates, what’s important about this research is that we can measure the size of the impact and track it from week to week in near real time. We can also explore how these effects vary across the country, and across different social and demographic groups.”

Dame Julia Unwin, chair of Smart Data Foundry, an Edinburgh University subsidiary which was set up to unlock the power of financial data for the good of society, added: “As always it is the poorest members of our society who suffer most when costs soar.

“While we have all had to cope with rising interest rates, higher energy prices and inflation, we are definitely not all in the same boat, with low-income households being disproportionately affected.

“A rise in costs of just a few pounds a week can mean children having to go to bed hungry at night or families being unable to afford new shoes or a warm jacket for their little ones.

“I hope research and insights like this will make policymakers sit up and take notice of the potential power of financial data when it comes to shaping and targeting effective support during the cost-of-living crisis.”