UK Mortgage Rates at a 15-Year High, Slowing Housing Market

6:23 pm
July 11, 2023
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Mortgage rates in the United Kingdom have reached a 15-year high, putting pressure on homeowners and causing the housing market to slow down. According to data from Moneyfacts, the average two-year fixed rate for residential mortgages has peaked at 6.66%, the highest level since August 2008. This increase in mortgage rates is driven by factors such as rising inflation and expectations of further interest rate hikes by the Bank of England (BoE) to control inflation. Experts warn that mortgage holders will experience more financial strain as rates continue to rise.

UK Housing Market Attempted a Comeback Early This Year

The UK housing market experienced a turbulent start to the year but began to recover in early 2023. However, this recovery has been short-lived as homeowners and buyers now face higher mortgage rates, making it more expensive to borrow money to buy a home. As a result, house prices are starting to fall, and the number of mortgage approvals has declined.

Experts Warn of Further Pain for UK Mortgage Holders

Experts are warning that the rising cost of mortgages in the UK could have a significant impact on mortgage holders. Danni Hewson, head of financial analysis at AJ Bell, expressed concern that mortgage payers are approaching fixed rate renewal dates with dread. Matthew Ryan, head of market strategy at Ebury, predicts that the central bank will increase interest rates to around 6.35% within the first three months of next year, which will have a large impact on mortgage holders as their monthly payments will increase.

What Does This Mean for Homeowners?

Homeowners in the UK are likely to be significantly affected by the rising cost of mortgages. Those on variable-rate mortgages will see their payments increase as interest rates rise, while those on fixed-rate mortgages will be locked into higher rates when their fixed-rate period ends. Homeowners struggling to make mortgage payments should contact their lenders for possible solutions, such as payment holidays or remortgaging.

FAQs

What is causing mortgage rates to rise in the UK?

Mortgage rates in the UK are rising due to factors such as increasing inflation and expectations of further interest rate hikes by the Bank of England to control inflation.

How will rising mortgage rates affect homeowners?

Rising mortgage rates will lead to higher monthly payments for homeowners, putting additional financial strain on them. It may also result in a decline in house prices and a decrease in mortgage approvals.

What options do homeowners have if they are struggling to make mortgage payments?

Homeowners who are struggling to make mortgage payments should reach out to their lenders for potential solutions. These may include payment holidays or remortgaging options.

Are fixed-rate mortgages a better option than variable-rate mortgages in the current market?

Fixed-rate mortgages provide stability and protection against rising interest rates in the current market. However, it is essential to carefully consider the duration of the fixed-rate period and the potential impact on monthly payments once the fixed-rate period ends.

Will mortgage rates continue to rise in the coming months?

There is speculation that mortgage rates in the UK may continue to rise, especially if the Bank of England decides to implement further interest rate hikes to control inflation. It is advisable to closely monitor market trends and consult with mortgage professionals for the most accurate and up-to-date information.

Sources:
CNBC
Moneyfacts


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