Would Conservative spending commitments mean a £4,800 increase in the average mortgage?

The result would be an increase in the average mortgage totalling £4,800 over the course of the parliament.

The Labour party has claimed that the measures announced in the Conservative manifesto would raise the cost of the average mortgage by £4,800 over the course of the next parliament.

This figure was presented at a press conference by the shadow chancellor Rachel Reeves, and in a dossier saying “the Conservatives’ plan will mean £4,800 more on your mortgage”, as well as in an online advert.

The £4,800 figure is a speculative estimate that relies on several uncertain assumptions.

It also seems to describe the additional mortgage cost per year by the end of the parliament rather than the accumulated cost over the whole parliament (although this doesn’t appear to have been said explicitly, and others have interpreted this differently).

Some of the detail behind Labour’s workings remains unclear. We’ve asked Ms Reeves and Labour a series of questions about their calculations but haven’t yet had a response—we’ll update this fact check if we hear back.

Politicians should share accurate statistics and analysis with the public, and be clear about how they were calculated, so that people can base their vote on correct information.

The Conservatives have reportedly disputed Labour’s estimate.

Where the £4,800 comes from

On 11 June Labour released a policy document in response to the Conservative manifesto launch the same day.

Labour’s document includes a “scorecard”, which it says shows “unfunded promises” in the Conservatives’ plans totalling an estimated £71 billion. The document says:

The Treasury has published analysis on the impact on interest rates of a reduction in spending funded by an increase in borrowing…

The analysis notes that a fiscal loosening funded by borrowing will ‘increase the level of demand in the economy, thereby increasing inflationary pressures, which may lead to an inflation-targeting central bank increasing interest rates.’ The Treasury calculated that every extra 1 percentage point of GDP of borrowing could increase interest rates by up to 125 basis points.

Over the whole scorecard period, policy measures lead to a £71 billion rise in borrowing which is equivalent to around 0.4 per cent of GDP every year on average, meaning interest rates could rise by around 56 basis points every year on average.

For someone with an 85% mortgage on the average house in the UK this could increase mortgage payments by £4,800 over the Parliament.

Is the £71 billion correct?

The scorecard that produces the estimate of £71 billion includes figures for a large number of named policies, some of which are spending commitments and others “revenue raisers”. We’ve not been able to examine every costing in detail, but some rely on significant assumptions.

For example, Labour assumes that the Conservatives’ welfare reforms will generate no savings at all, compared to the Conservatives’ estimate of £12 billion a year by 2029/30. The Institute for Fiscal Studies has cast doubt on this figure, but it is not certain that the reforms would raise nothing, as Labour assumes. 

An apparent misprint in an earlier version of the costings document, circulated by email to the media, seems to have caused some confusion too.

In this version, “defence spending” was listed as a series of positive values, suggesting it was a revenue raiser, whereas the savings from “reducing civil service numbers and reallocating R&D spending” were listed as negative, suggesting they were a spending commitment. The ‘+’ and ‘-’ signs of these two rows were corrected in the online version. A Conservative spokesperson mentioned this issue in comments to the Telegraph and the Express.

What about the effect on mortgages?

Setting aside the uncertainty over the £71 billion figure, Labour has made a series of further assumptions in order to make its claim about mortgages.

For a start, it has assumed that all of the £71 billion would have to be borrowed, rather than a future Conservative government choosing to reduce spending elsewhere or raise other taxes.

It also seems to have assumed that tax cuts would not boost growth. Some of the measures in the Conservative manifesto, for instance cutting taxes, might make the economy grow faster, leading to higher tax revenues that Labour’s estimate does not seem to account for.

And even if we assume that the government were to borrow £71 billion over the next five years, it is far from certain that this would add £4,800 to the average mortgage, as Labour claimed.

The party has not shared the full detail of its calculations with us, but it appears to have done a calculation similar to one published in another document last month. That document, apparently by coincidence, also estimated that a different set of possible Conservative policies could require £71 billion in extra borrowing, and claimed this could cause a 2.5ppt rise in interest rates.

Despite starting from the same £71 billion figure, that document made a slightly different calculation when it came to mortgages, saying: “For someone with a mortgage on the average UK house worth £285,000 and a 20% deposit, a 2.5% rise in interest rates would increase monthly mortgage payments by £350.”

A £350 rise in monthly payments amounts to a £4,200 annual rise, which in this calculation would apparently only be realised at the end of the five-year period, once all the assumed borrowing and resultant rate rises had taken effect.

The June document doesn’t mention a monthly increase or an average house value. It also seems to change the level of the deposit from 20% to 15% and assume a slightly higher rise in interest rates, amounting to an average of 56 basis points over five years, making a 2.8ppt rise in total.

We need more detail

Without some other important details, we’ve not been able to fully replicate Labour’s calculations.

For example, we don’t know how many years Labour assumed would be remaining on the average mortgage in its calculations.

And it’s unclear whether Labour has attempted to factor in savings from fixed-rate mortgages. Many people have mortgages based on rates fixed for several years, which means that they would not necessarily pay more immediately when rates rise.

We don’t know what figure Labour used for the “average house”. If it used recent sale prices, then that may be too high, as many people are paying off mortgages for houses they bought years ago.

Looking at these figures with us, mortgage expert David Hollingworth of L&C Mortgages told Full Fact: “This seems to be talking about people taking out new mortgages, which would typically be larger than many existing homeowners may hold. Many people would also have fixed rates, which would protect them against some or all of the interim increases, depending on when they took their mortgage.” 

As we often say though, we can’t fact check the future, so of course it’s possible that the next government could borrow £71 billion more, or that the average mortgage could rise by £4,800. But the calculations provided by Labour to support that claim are speculative and rely on a whole series of uncertain assumptions.

Should it be ‘up to’ £4,800 anyway?

Both Labour’s May document and June document say that Treasury estimates show that “every extra 1 percentage point of GDP of borrowing could increase interest rates by up to 125 basis points”.

This refers to Treasury analysis which says “an increase in borrowing of 1% of GDP (£25 billion) might increase interest rates by between 50 and 125bps (to the nearest 25 bps)”.

In other words, the Treasury estimate gives a range, not a single value—and it’s unclear from the explanation provided whether Labour used the highest value or something within the range.