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Finanze® Daily Digest - 05/10/2022

Writer's picture: Edgar RayoEdgar Rayo


The Brief: Mortgage rates are now closer to 6% after lenders resumed their activities following the market turmoil that shook UK gilts last week. Moneyfacts reports that the two-year fixed-rate mortgage reached 5.75 per cent on Monday, which Bloomberg estimates to be around £1,325 monthly from only £725 the previous year.


Why It Matters: Banks temporarily pulled out some of their mortgages for new customers last week in response to the rise in gilt yields that are typically used to price fixed-rate deals. Borrowers hurried to lock in deals as analysts anticipated that the return of lending institutions would constitute steep hikes in mortgage costs.


Finanze® Foresights: The consequences of rising mortgage prices will be brutal in the coming months, to say the least. It is estimated by the Bank of England (BoE) that more than two million homeowners will shift to new mortgage deals once their fixed-rate mortgages expire between today and until 2024. Many homeowners have also resorted to early termination to secure new deals despite the high penalties involved. For now, households will have to reduce their non-discretionary purchases to adjust to their higher monthly mortgage obligations. However, we expect that once financial markets’ uncertainty eases, lender repricing will be averted. This begins once the Office for Budget Responsibility’s (OBR) forecast report is published and the government’s fiscal response is finally aligned with the BoE’s monetary policies.


--- To the fullest extent permitted by law, Finanze Ltd are not responsible for any errors or omissions in any statements, views, opinions, facts, figures, commentary or any other material in the articles contained herein, or for loss arising from its use or performance, or for the results of any actions or lack of action taken on the basis of information provided in articles.

The topics covered in articles are complex and do not substitute the need for financial, legal, accounting, tax and other advice before making any decisions or taking any action based on information in articles.

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