Credit Squeeze - Mortgage Rates Rise as Lenders Return

Mortgage interest rates have gone up - with the average two-year fixed rate mortgage close to 6%, as mortgage lenders have significantly increased interest rates.

Here is a report from BBC news.

Halifax for example, has returned to the mortgage market with a 2 year fix of 5.84%.

There are significant implications of changes such as this for the housing market and, by definition, the wide macroeconomy.

This short video from Faisal Islam is revealing - he interviews a mortgage broker in Birmingham who tracks the market to see what mortgage deals are available from home loan providers.

"A Birmingham mortgage broker shows me banks returning to the mortgage market today at rates 1.5 percentage points higher than a week ago - 5-6% - and that’s with a 40% deposit."

In other words, you can get a mortgage, but it will cost you a lot more and they will only lend you 60% of the purchase price.

When mortgage interest rates rise, then the effective disposable income of property-buyers goes down. They have less to spend each month on other goods and services.

According to Samuel Tombs, If mortgage rates rise to 6%—as implied by markets’ current expectations for Bank Rate—the average household refinancing a 2 year fixed rate mortgage in the first half of 2023 will see *monthly* repayments jump to £1,490, from £863.