UK mortgage rates set to continue to skyrocket
The outside temperature isn’t the only thing that’s increasing this week, as experts have warned mortgage rates are due to rise further as turbulence continues to hit the market.
Since the rates of inflation began to rise, mortgage rates have hit record highs. In December 2022 they reached up to 3.5% – the highest since October 2008. However, rates are still climbing as they have gone up around 0.5% in the last month to approach an average fixed deal of 6%.
As a result, today Santander were the latest bank to announce they were ‘temporarily withdrawing all our new business residential and buy-to-let fixed and tracker rates at 7:30pm on Monday 12th June’, due to ‘market conditions’.
The bank added: ‘We’re relaunching our full new business range on Wednesday 14th June.’
In addition to this, last year HSBC also took new deals customers via brokers off the market but temporarily reopened them on Friday following a vast amount of criticism.
An estimated 1.5 million households are set to come off fixed mortgage deals this year and face a sharp rise in their monthly repayments. Rates have been rising since recent data that was released by the ONS, showed that UK inflation is not coming down as quickly as expected.
In addition to inflation not coming down as quickly as expected, the rising cost of mortgages was also exacerbated by the financial market fallout that followed the Truss government’s mini-budget of last September.
Recent research by Labour estimated that the actions of the Bank and the former PM meant the average homeowner was paying an additional £150 a week.
HSBC, like rivals, is fearful of a growing number of defaults as housing costs further fuel the wider cost-of-living crisis.
However, individuals across the UK have voiced their opinions that continuing to increase mortgage rates is a blunt tool. While it is aimed at taking demand, and therefore price pressures, out of the economy, it also adds to household costs through mortgages as they are reflected in deals that track Bank rate and, later, new fixed rate offers.
According to financial data firm Moneyfacts, the average two-year fixed-rate mortgage deal is 5.86%, while a five-year deal has hit 5.51%.
Ian Stuart, the Boss of leading UK bank HSBS, said these times are ‘deeply concerning’ for a lot of customers.
He added: ‘If you’ve got an old rate, as many will have, let’s say 1.5%, and you’re going to come off that rate and go onto something like 5%, that is a big impact on your monthly budget.’
In addition, Mr Stuart claimed that HSBC are expecting the Bank of England to hike up interest rates, putting more pressure on the market.
Image: Shutterstock