The Brief: Morgan Stanley issued a note yesterday with a warning that mortgage rates are likely to rise in the next 12 months. It also added that with higher utility bills and a 6% mortgage rate, around 30% to 40% of UK households will find it difficult to sustain their monthly mortgage payments.
Why It Matters: Tough times are ahead for the property sector. The Financial Times reported yesterday that the buy-to-let (BTL) market, which is typically financed by variable rate mortgages, will struggle even more as higher rates continue to squeeze landlords’ cash flow. It also cautioned BTL lenders and investors to anticipate further stress as more fixed-rate mortgage holders will soon refinance.
Finanze® Foresights: Rishi Sunak announced that his priority will be restoring economic stability and confidence. However, this will not come easy for the property and mortgage markets given affordability issues brought by the cost-of-living crisis. He’s appointed Michael Gove, a staunch critic of former PM Liz Truss, as Secretary of State for Leveling Up, Housing and Communities. Gove has been very outspoken about his stance against remediation costs on buildings to protect leaseholders. During his stint as the Secretary of State at the Ministry of Housing, Communities and Local Government when Boris Johnson was the PM, he was tasked to develop a strategy to meet the country’s 300,000-a-year housing target — a goal that has yet to be achieved after he admitted in May this year that it could not be met. His reappointment yesterday can either turn out to be an opportunity to redeem himself, or offer this country false hopes yet again.
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