Mortgage rates heading for ‘biggest surge’ since 2008
Homeowners to be hit by interest hikes as Bank of England tries to rein in inflation
First it was food price rises, then bigger energy bills, and now homeowners are facing hikes in their mortgage payments too.
The Bank of England’s interest base rate currently stands at an all-time low of 0.1%, after being slashed in March last year to limit the economic fallout of the pandemic. The base rate factors in many financial deals, including home loan payments, so “if it goes up, mortgage rates do too”, The Mirror explained.
And with experts now predicting that interest rates will rise to rein in inflation, the UK is heading for “the largest hike in mortgage costs since the 2008 property crash”, said the paper.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Adding up the cost
The predicted rates increases would be the first since July 2018 and are expected to begin with a “modest” rise of 0.15 percentage points in December, taking the base rate to 0.25%, said The Times. The impact on mortgage payers would be “softened or delayed because most homeowners and buyers are on fixed-rate deals”, the paper added.
But in a blow to households already facing “soaring living costs”, experts expect a “sharp” 0.5 percentage-point climb on a new two-year fixed rate mortgage to 1.7% by the end of next year, said The Telegraph. That would add an additional £50 a month to the cost of paying off a typical £200,000 mortgage.
A total of around two million UK households are on variable-rate mortgages, “meaning a change to base rate would be passed on straight away”, said The Mirror.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
And while fixed-rate mortgages remain unchanged for the duration of the deal, a rising base rate would hike the cost of new fixed-rate mortgages, so “all homeowners would face higher prices eventually”.
‘Incredible deals out there’
“The biggest debt cost for most consumers is their mortgage,” said John Stepek in MoneyWeek, “and in about 80% of cases that’s fixed.”
But “if it’s not, you might want to at least consider shopping around just now, given that there are still some incredible deals out there”, he added.
The Independent’s Vicky Shaw agreed that switching mortgage deals could be a good way to “save some cash” amid “rising household bills”.
“A spate of mortgage price wars means there are many low rates to choose from,” she said. Research by MoneySuperMarket last month found that the number of deals with rates below 1% had jumped by 400% since June.
Just be sure “to do your research – thoroughly – and think carefully about any major financial decisions”, said Shaw.
-
Last hopes for justice for UK's nuclear test veterans
Under the Radar Thousands of ex-service personnel say their lives have been blighted by aggressive cancers and genetic mutations
By Sorcha Bradley, The Week UK Published
-
'It may not be surprising that creative work is used without permission'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
5 simple items to help make your airplane seat more comfortable
The Week Recommends Gel cushions and inflatable travel pillows make a world of difference
By Catherine Garcia, The Week US Published
-
Will the housing slump ever end?
Today's Big Question Probably not until mortgage rates come down
By Joel Mathis, The Week US Published
-
2023: the year of sticker shock
The Explainer Many Americans were down on the economy this year due to problematic prices
By Justin Klawans, The Week US Published
-
Interest rates: more ‘trauma’ for households
Talking Point Latest hike will cause ‘plenty of pain for borrowers’
By The Week Staff Published
-
Britishvolt: how Britain’s bright battery hope was zapped
feature Battery-making startup’s demise ‘has thrown up tales of reckless spending’ and incompetence
By The Week Staff Published
-
Sam Bankman-Fried: the arrest of the disgraced crypto crusader
feature The founder of the failed crypto exchange FTX was arrested on Monday
By The Week Staff Published
-
The UK’s migration ‘surge’ examined
feature 1.1 million people migrated to the UK last year, according to the latest ONS data
By The Week Published
-
Why UK companies are facing a dystopian, zero-growth future
feature In prioritising stability, the Treasury risks ‘stifling enterprise and entrepreneurship’
By The Week Staff Published
-
How will recession affect the UK?
Today's Big Question Inflation set to hit 13% by end of year as UK on course for recession, warns Bank of England
By The Week Staff Last updated