Matthew Ryan, head of market strategy at global financial services firm Ibery, predicts that the central bank will raise interest rates to around 6.35% during the first three months of next year.
UK mortgage rates are at a 15-year high, adding pressure to homeowners and slowing the housing market. According to data from Moneyfacts, the average two-year fixed rate for a residential mortgage has now peaked at 6.66%, up slightly from the 6.63% it hit on Monday, July 10th. %. However, the new rates are the highest UK homeowners have seen since August 2008, during the global financial crisis, sending mortgage costs to their highest levels in nearly two decades.
The UK housing market attempted a comeback earlier this year
The country’s housing market has been on the verge of a downturn lately. After a turbulent start to the year, the market began to recover in early 2023. However, the recovery was short-lived, as homeowners and buyers recently faced renewed mortgage pain.
The rise in UK mortgage rates is driven by several factors, including rising inflation and expectations that the Bank of England (BoE) will continue to raise interest rates to control inflation. The Bank of England has expanded its base rate several times since December, and the central bank is still expected to raise interest rates further to keep inflation in check.
Last month, the Bank of England raised its base rate to 5%. The new rate hit a 13-year high. Economists think the base rate could rise to 6% by the end of the year. The increase in the interest rate caused mortgage rates to rise, which made it more expensive for people to borrow money to buy a home. As a result, home prices began to fall, and the number of mortgage approvals decreased.
Experts warn of more pain for UK mortgage holders
according to reportsExperts warn that the rising cost of a mortgage can take a huge toll on mortgage holders. Danni Hewson, head of financial analysis at AJ Bell, an investment and stock brokerage firm, said Tuesday:
“Mortgage payers march toward fixed-rate renewal dates with a sense of dread.”
She believes that the mood in the market is changing and bad news is becoming more common.
Another expert, Matthew Ryan, head of market strategy at global financial services firm Iberi, predicts that the central bank will raise interest rates to around 6.35% during the first three months of next year.
“Financial markets are pricing in UK interest rates peaking at around 6.35% in the first three months of 2024, up from 5% currently,” he said.
Ryan also warned that this could have a significant impact on mortgage holders, as they will see their monthly payments increase.
What does this mean for homeowners?
The rising cost of mortgages is likely to affect homeowners in a big way. Those on variable rate mortgages will see their payments increase as interest rates go up. Whereas those with fixed rate mortgages will not see their fees increase immediately. However, they will be charged at a higher rate when the flat rate period ends.
Homeowners who are struggling to make their mortgage payments should contact their lenders for possible solutions. There may be options to help them, such as a holiday payment or refinancing.
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Chimamanda is a cryptocurrency enthusiast and seasoned writer focusing on the dynamic world of cryptocurrency. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love of travel and food, bringing a fresh and engaging perspective to her work.
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