The UK Housing Market Is Straining

The UK Housing Market Is Straining
Reuters x Finimize

9 months ago1 min

Mortgage rates in Britain rose again on Friday as economists warned that rising borrowing costs would put the housing market under renewed strain.

The average rate on a two-year mortgage deal across the range of loan-to-value ratios rose on Friday to 5.82%, compared with 5.30% a month ago, financial data provider Moneyfacts said.

Stubbornly high British inflation data last month sparked a big jump in market interest rates as investors scrambled to price in more increases in borrowing costs from the Bank of England in coming months.

Interest rates offered by mortgage lenders have soared in response. Late on Thursday, HSBC temporarily withdrew mortgage products for new customers until Monday.

"To ensure that we can stay within our operational capacity and meet our customer service commitments, we occasionally need to limit the amount of new business we can take each day," an HSBC spokesperson said.

Rival lender Nationwide Building Society also raised its mortgage rates on Friday, having already revised them up twice since last month's Bank of England interest rate hike.

On Friday, consultancy Oxford Economics predicted a 10% peak-to-trough drop in house prices, based on the BoE raising interest rates to 5%.

"This repricing of mortgage products coincides with the peak period for existing fixed rate deals ending," said Andrew Goodwin, chief economist at Oxford Economics.

"This will maintain the squeeze on household finances, offsetting the boost from lower energy prices. It also suggests we're likely to see an increase in financial stress and, potentially, a rise in the number of forced sales."

Ratings agency Moody's on Thursday forecast a 10% drop in house prices.

British house prices in March were 3% down on their all-time peak of November 2022, at which point they were 27% higher than before the COVID-19 pandemic, according to official data.



All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG