UK mortgage rates rise again, turning screw on homeowners and buyers

MAJOR British lenders on Thursday (Jun 28) announced another increase in mortgage rates offered via brokers, pushing many products above the 6 per cent mark in painful news for many homeowners and potential buyers.

Lenders have repriced home loan offerings repeatedly in recent weeks in a scramble to keep up with soaring funding costs, spurred by expectations of more interest rate hikes from the Bank of England (BOE) as it battles stubbornly high inflation.

Barclays, NatWest and Virgin Money informed brokers that rates on many mortgage offerings will rise again on Friday, according to e-mails seen by Reuters.

Nationwide Building Society, another major lender, raised rates on products offered via brokers earlier on Thursday.

Two-year swap rates – a key determinant of mortgage borrowing costs – have soared by 0.83 percentage point over the course of June.

If sustained until the end of Friday, it would mark the biggest one-month increase since May 1989 – apart from during the market turmoil triggered by the economic agenda of former prime minister Liz Truss late last year.

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Mortgage rates of 6 per cent represent the same financial burden from repayments as they did in the late 1980s, even though mortgage rates were around 13 per cent then, said housing market analyst Neal Hudson, founder of consultancy BuiltPlace.

Mortgagors today borrow much greater sums against their income – a ratio that has risen from 2.0 in the late 80s to around 3.5 today – while changes to taxes and mortgage products have also altered the equation.

BOE data published on Thursday showed that lenders approved more mortgages than expected in May but for the first time since records started in 1986, the value of mortgage lending contracted for a second month running. REUTERS