West News Wire: According to data from data source Moneyfacts, a major mortgage rate in the UK increased this week to its highest level in fifteen years, surpassing the rate attained in the wake of a September “mini-budget” crisis.
On Tuesday, the average two-year fixed residential mortgage rate increased to 6.66%, just surpassing the 6.65% mark reached in October. Mortgage rates in Britain are currently at their highest level since August 2008, when they were 6.94% during the financial crisis.
The Bank of England has raised interest rates repeatedly in an effort to combat inflation, which has caused mortgage rates to skyrocket and hampered the British property market.
Concerns about stickier-than-expected consumer-price growth, which held at 8.7% in May, have led to a significant increase in the cost of funding, with fixed mortgage deal rates climbing in recent weeks.
On top of the strains on the country’s ailing housing market, the rate surge is sparking fears of a catastrophe for cash-strapped homeowners.
“Undoubtedly, households and customers are feeling the effect of not just mortgage rates increasing but the wider cost-of-living crisis,” Andrew Asaam, homes director at Lloyds Banking Group was quoted by Reuters as saying.
According to a National Institute of Economic and Social Research research, the BoE’s most recent rate increase of 0.5 percentage points to 5% would cause 1.2 million British households—or 4% of all households—to run out of savings by the end of the year due to higher mortgage repayments.
Matthew Ryan, head of market strategy at multinational financial services company Ebury, stated that “we suspect that higher mortgage rates will contribute to weaker economic activity in early-2024, and we are now not ruling out a technical recession in the first half of next year.”
According to the financial markets, UK interest rates will peak at about 6.35% in the first quarter of 2024, he continued.