More mortgage costs rise with ‘worse ahead’ as Bank of England base rates expected to reach 5.5% next year | Business news
Britain’s largest mortgage bank has made some mortgages more expensive as Bank of England interest rates are expected to rise higher than previously assumed.
Nationwide has said interest rates on new fixed-rate mortgages will rise 0.45 percentage points. It follows moves by lenders such as Halifax, Santander and Atom Bank, which also raised their rates by up to 0.2 percentage points this week.
There are also fewer mortgages on the market for potential borrowers. According to financial information company Moneyfacts, 38 mortgage products fell on Thursday and Friday.
Spending Calculator: See which prices have gone up or down
Why high energy prices are the new normal
Worse is to come, the group said, as other lenders may do the same.
“When lenders pull back mortgage products, it may be in response to interest rate volatility, or even demand,” Moneyfacts spokesperson Rachel Springall said. “Withdrawals, however, could influence other lenders to follow suit and reconsider their own proposals.”
Average two- and five-year fixed-rate mortgages are now 5.35% and 5.02%, respectively, according to data from Moneyfacts.
Mortgage costs increased significantly according to the unrest in the market of the September budget This has been announced by former chancellor Kwasi Kwarteng.
The rates were thought to have reached a peak but markets now expect the Bank of England base rate to reach 5.5% in November and to remain high until February 2024.
Price rises did not slow down as much as the Bank had hoped and core inflation, which removes volatile energy and food prices, has at a 30-year high.
That expected increase is priced in by lenders when evaluating what rates new customers should offer.
It also affects the amount of interest the state pays to the investors who bought its bonds — notes of debt used by states to raise money.
Interest rates on UK two-year government bonds – known as gilts – are up to 4.55% on bonds due in two years. It is the highest rate since the mini budget.
The central bank has been constantly raise interest rates since December 2021 in an effort to bring inflation back to the 2% target.
The policy is backed by Chancellor Jeremy Hunt, who is exclusive told Sky News he “is comfortable with the Bank of England doing whatever it takes to bring down inflation, even if it might trigger a recession”.