Millions of homeowners issued warning as mortgages set to rise again with borrowing costs soaring
Millions of homeowners are being issued with a warning as mortgages are set to rise again with Britain’s cost of borrowing soaring
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Gilt yields, the interest paid to investors in government bonds, are now higher than when former prime ministerLiz Truss’s mini-Budget caused a market meltdown last year. The gilts are used to price mortgages and loans.
When interest rates go up, prices drop and yields go up. Strong wages growth of 7.2 per cent this year has pushed up inflation. As a result, it is feared the Bank of England will now have to further hike interest rates to try to bring inflation under control.
Samuel Tombs at Pantheon Macroeconomics said: “The renewed pick-up in wage growth will add fuel to the recent rise in gilt yields and expectations for the future path of the bank rate.”
The BoE is predicted to hike rates again from 4.5% possibly to as high as 5.75%. This would take interest rates to their highest levels since July 2007.
On Monday Santander became the latest big lender to temporarily withdraw new deals due to "market conditions". Meanwhile, NatWest said it was increasing rates for new residential mortgages by 0.2 percentage points, and for buy-to-let mortgages by up to 1.57 percentage points from Tuesday.
About 1.5 million households are set to come off fixed mortgage deals this year and face a sharp rise in their monthly repayments. David Hollingworth from broker London & Country, told BBC Radio 4’s Today programme: "It’s been pretty relentless for the last couple of weeks. We’re back to that phase of you can’t hang around if you are looking at a fixed rate."
"Unfortunately I think this week we may still have to see more of that happening. But hopefully those rates will just start to find a level and we’ll see things start to calm down in the near future.”
Chancellor Jeremy Hunt said: “We are really very aware of the pain felt by many families. But the biggest single thing that we can do is support the Bank as they bear down on inflation.”