LONDON (AP) – Homeowners and renters in the UK faced more grim news on Tuesday as mortgage rates hit levels not seen since. unfinanced tax cuts The government’s announcement last fall surprised investors.
with Bank of England raises interest rates If interest rates hit a 15-year high of 5% to combat high inflation, it’s no surprise that lenders will raise the cost of borrowing to consumers and businesses. But inflation has turned out to be more stubborn than expected, and the central bank is expected to continue raising rates, possibly to 6%, the highest level since 2001.
The outlook has ripple effects on mortgage costs. The average interest rate for five-year fixed rate mortgages in the UK on Tuesday reached 6.01%, up from 5.97% the day before, according to financial information firm Moneyfacts.
This is the highest amount since the aftermath of last fall. Liz Truss’ short-lived government’s tax planwhich caused investors to lose confidence in the UK’s financial position.
The worry is that if the central bank continues to raise rates, mortgage rates could rise above that level, creating new problems in the financial crisis. cost of living crisis it was the fuel strike by workers want a higher salary.
“Some fixed rates could realistically reach 7% before summer is over,” said Paul Welch, CEO of London-based mortgage broker LargeMortgageLoans.com. I am not happy to say that there is.”
Truss’ successor, Rishi Sunak, made a central pledge to halve consumer price inflation to around 5% in 2023. however, Inflation is 8.7% There are real doubts as to whether that ambition will be achieved in the year to May.
Sunak acknowledged on Tuesday that inflation “has proven to be more persistent than people expected”, but the probability that his goal will be achieved.
Many homeowners modified their mortgages during the coronavirus pandemic when the central bank’s key rate was near zero, which should ease the recent rise in interest rates.
But households whose fixed interest rates expire in the coming months (more than 1 million) will face much higher borrowing rates when trying to secure new deals. Homeowners who rent out their properties will also want to pass on high mortgage costs.
Unlike the US, where many homeowners lock their mortgage rates for 30 years, it’s common practice in the UK to fix interest rates for much shorter periods. Once that ends, they either move to floating rates higher than the lender’s normal or seek other deals.
