—mini-budget in September forced banks to suspend hundreds of mortgage products, leading to a crash in the availability of loans. According to data released by the lender Nationwide on November 1st, house prices fell last month for the first time in 15 months. And mortgage rates have now spiralled to their highest since 2008. At the end of October, the average two-year and five-year fixed rates jumped to 6.48% and 6.33%, respectively, according to Moneyfacts, a data provider.
By the end of 2024, the annual bill for one in five British households will increase by an average of £5,100 , according to the Resolution Foundation’s latest estimates. The think-tank expects that in London annual payments for households will rise by £8,000. Borrowers on the lowest incomes will bear the brunt of the storm. Those towards the bottom of the scale will fork out an extra 10% of their income on housing costs by the end of 2024, compared with around 4% for those at the top.
The risk of negative equity, when a property is worth less than the loan that it is collateral for, also looms. In Britain, a fall in house prices of 20% would leave up to 5% of mortgages in negative equity, according to Neal Hudson of Residential Analysts, another consultancy. That would rise to around one in ten households with a mortgage in London.
All this uncertainty means that banks are pulling the riskiest mortgage products off the shelves. This will make it even harder to get on the housing ladder. Cash-strapped young professionals with small deposits will be especially stretched. In the year to October, lenders withdrew 60% of mortgage products that required only a 5% downpayment. For mortgages requiring a 10% deposit, the number had fallen by nearly half. Would-be buyers may welcome a slump in the housing market.
to borrow to spend on houses, and anything else, will plummet further. Property may get cheaper. Mortgages won’t.
Estate agents have made fortunes and anyone lucky enough to be a homeowner as seen a massive increase in their wealth. But no one should expect interestrates to remain so low forever. The UK long term average is about 5%.
Subprime UK edition
Is this an attempt to villianise the 'top?' As with a progressive tax rate (where the top pay more in absolute cash amount and the % rate), interest rates should follow the same logic i.e. the lower your income, the lower the interest rate you pay?
Do we see a revolution in England soon? - Putin stripped them of their clothes and Biden deceived you with sanctions and your people are hungry
Like it was all planned
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M2 up 40% since Biden came in. Fed Assets at Peak. Powell has to restrain Money supply in addition to Rates. Anamoly: Corporate earnings & Inflation peak together. As commodity prices came down, retail stayed high. Managed Recession or Stagflation?
Biden offering uncontrollable Inflation & Ukraine. GOP moving extreme Right to capture Trump's Base. What a choice!
It should be 100 basis points.
I had to laugh , they said on the news interest rates not rising as much as was expected due to Rishi actions , they never put them up. Much in the first place , when they should of, now this will still be less than 1% again 😩
Same place where borrowers have always been. Slave to the lender.
And yet, there was a whole generation way back who managed to buy property with high interest rates and inflation.
Tax the rich
Not sure mortgages will go up that much now. Most of the hikes are probably priced in. Indeed if the BoE strikes a more dovish tone for the future. Maybe some rates will come down. Maybe.
Also why don't banks increase their savings rates in line with interest rates?
Quit listening to joe!