Fears are growing that mortgage costs could rise to a 30-year high amid financial turmoil that left many experts expecting interest rates to reach 6% next year.
That has left mortgage holders facing increases in their bills worth hundreds of pounds a month and thousands a year.
It follows that the UK financial sector is plunged into uncertainty after: Quasi Quarteng‘mini budget’ on Friday.
The consequences are that mortgage rates are rising, credit giants are withdrawing their mortgages and are concerned about a crash in the housing market.
Potential buyers will see deals disappear overnight, while people whose mortgages are tied to interest can expect huge increases.
Homeowners who borrowed £400,000 on a two-year fixed deal – which expires next year, when the base rate is expected to be 6% – would see their monthly repayments rise by £882, or more than £10,500 a year, the BBC reports.
For a comparable 25-year deal with a 200,000 mortgage, payments could rise from less than £850 a month to nearly £1,300.
The likely increases come amid a major crisis in the cost of living that has sent household bills soaring, particularly for energy.
An analyst at mortgage broker Charcol, Ray Boulger, predicted that “very few” mortgage deals would be available next week with rates below 5%. the mirror reported.
It quoted Andrew Wishart, a senior real estate economist at consultants Capital Economics, who added: “At current home price levels, a rise in mortgage rates to 6.6% would cause the cost of repayments on a new mortgage to rise until the end of the year.” top level. since 1990.’
Meanwhile, Moneyfacts.co.uk has registered a dramatic drop in the number of mortgages available on the market.
It states that on Friday, the day of the mini-budget, 3,961 home mortgage products were available. By Monday the total had fallen to 3,880 and by Tuesday morning it had shrunk to 3,596 deals.
That is a drop of 365 from Friday, the analysis shows.
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The overall choice of mortgage deals remains significantly greater than during the depths of the Covid crisis, but the wider issues are now causing major concern among experts – including the International Monetary Fund, which rebuked Mr. Kwarteng and Liz Truss in a highly unusual critique last night.
High street banks are trying to change their mortgage offers.
Britain’s largest construction company, Nationwide, said it will raise its fixed rates at two, three, five and ten years by between 0.90 and 1.20 percentage points from today.
Existing members looking to switch to a new deal or borrow more will see a lower increase from 0.55 to 0.85 percentage points, while tracker rates will increase by 0.50 percentage points, in line with the recent increase in the base rate of the Bank of England.
Nationwide said in a statement that swap rates, on which mortgage prices are based, have risen to unprecedented levels in recent days.
The rates for new customers relocating and for new buyers include two-year flat rates from 5.59% with a fee of £999.
Mortgage holders have been urged to seek independent advice if they have concerns.
Henry Jordan, Nationwide’s director of mortgages, explains: “The changes made to our new business offerings reflect the current interest rate environment, which has seen mortgage rates rise across the market in line with a rapidly changing economic environment.
“Swap rates, on which mortgage pricing is based, have risen sharply as market factors factor into expected future bank interest rate hikes. These latest changes will ensure that we can continue to borrow in a way that is sustainable for all types of borrowers.”
HBSC UK, Santander UK, Virgin Money, Halifax and the Skipton Building Society are some of the other providers making changes.
Rachel Springall, a financial expert at Moneyfacts.co.uk, said: ‘The turmoil in the mortgage market can cause frustration for both borrowers and brokers as they see deals disappear overnight.
“The market remains quite volatile, so it is vital that consumers seek independent advice to assess their best options at the moment.”
David Hollingworth, associate director of communications at brokerage L&C Mortgages, said those who have already made a deal with their lender need not worry.
He also said he didn’t think it would be too long for lenders to come back with new deals.
Mr Hollingworth said that while it is not uncommon for lenders to withdraw deals, what has happened in recent days has been “incredibly fast”.
He added: “The more it (deal withdrawals) happens, the more you reduce borrower choice, but I don’t think it will be too long before you see lenders come back.”
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