In the News
Recession Watch - Key Mortgage Interest Rate rises above 4%
The average interest rate for a new two-year fixed home loan has climbed above 4% for the first time since 2013.
The Guardian reports that it is estimated that between 1.3m and 1.5m fixed-rate mortgage deals in the UK are scheduled to end during 2022.
Higher interest rates on mortgages are likely to dampen housing demand and weaken property price growth.
In the short term, the biggest effect will be to cut the effective disposable income of home-owners whose debt servicing costs have risen. This is an important indicator for the economy.
The damaging mix of rising interest rates and sharply falling real incomes is a key reason why consumer confidence (sentiment) is so weak at the moment. And it seems that UK mortgage rates are rising even faster than the Bank of England is increasing its base interest rate with further increases in monetary policy interest rates forecast as we head into the autumn.
When people come to the end of their existing fixed rate deal, they are likely to face a steep rise in monthly interest costs. This might lead to a fall in the savings ratio as people eat into their savings to meet higher borrowing costs. Or, and especially for those who have taken out mortgages that are a high multiple of income, we can expect to see an increase in mortgage repossessions.
In other news, I read an article in the Financial Times about a new UK specialist mortgage lender planning 50-year fixed rate mortgages.