Mortgage interest rate rises

Journalist: Sarah O'Grady, The Daily Express

ended 29. April 2022

I'm looking for comments on the prospect and likelihood of mortgage interest rates rising through this year and into 2023. 

The Chancellor Rishi Sunak has told Cabinet interest rates will hit 2.5% over next year which could cause mortgage payments to jump more than £1,000.

And various economists point to mortgage rates doubling by the end of the year in the sharpest rise since 1990.

The jump will be in the average mortgage rate from 1.6pc at the start of this year to 3.2pc at the end of the year and a peak of 3.6pc in mid-2023.

I need quotes today (Thursday 28th) asap and before 5pm.

12 responses from the Newspage community

Star Quote
"Homeowners with a mortgage should prepare themselves for a shock if they have not yet fixed their mortgage rates. Rates are going one way and that's up. Brokers have been shouting from the rooftops for the last year that the era of rock-bottom interest rates is over. Lenders increase their fixed mortgage rates in anticipation of the Bank of England starting to hike interest rates further. Act now or face further financial pain in 2023."
Star Quote
"Mortgage rates today are based on predictions of interest rates tomorrow. Therefore, even the mere suggestion by Rishi Sunak that the Bank of England base rate is to rise will result in mortgage lenders running for the hills and hiking rates. Thankfully, the vast majority of borrowers are on a fixed rate and will be insulated from interest rate rises until the end of their current deal at least. Less savvy borrowers on tracker or variable rate products will be hardest hit by mortgage rate increases, and should act now to lock in for as long as their personal circumstances allow. Fixing into a low rate has arguably never been as important as it is now."
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"Mortgage rates are spiralling ever upward at the moment, with major lenders repricing by the day. Several major lenders now have core rates such as 2 and 5 year fixes at more than double the lows of last Autumn. Even the Chancellor is issuing dire warnings of four digit increases in mortgage payments for borrowers, a clear sign that concern is spreading about the impact this will have on homeowners. Where this inexorable rise in interest rates can continue in the face of the overall cost of living crisis is far from certain. If the squeeze continues, lenders will start competing for scarcer new business, and eventually the Bank of England will have to ease back on the current cycle of base rate rises."
Star Quote
"As scary as mortgage rates being 3.6% may seem, they are actually still very low in historical terms. We have been spoiled over the past decade or so with ultra-low rates, all kicked off by the Global Financial Crisis. But rates were always going to revert back to a higher level at some point. These rises are not the issue in isolation, it was always due and has long been predicted. The issue is the speed at which rates are increasing along with the wider cost of living crisis, tax and National Insurance increases, continued global trade and logistics disruption (China closing whole cities) and Brexit, plus a war on the edge of Europe. The combination of all these elements arriving together is the real pressure on household and small business finances."
"Rising interest rates will have a massive impact on people who are on variable rates. We have had a lot of clients looking to fix for a longer period recently due to the uncertainty. It would be prudent to fix sooner than later as rates look like they are going to increase further in the days, weeks and months ahead. If you are on a variable rate and have no plans to move, reviewing your mortgage should be an absolute priority."
"Rishi Sunak is being disingenuous. Mortgage payments will rise significantly more than £1,000 a year for many when you assume average mortgage sizes and the scale of rate rises we are seeing. A mortgage value of £200,000 at a rate of 1.6% over 25 years would have payments in the region of £809.27 a month. If that rate rises to 3.2%, assuming it was a 5-year fixed rate, the mortgage balance would have reduced to £166,000 with 20 years left. The £166,000 balance at 3.2% over the remaining 20 years would be a monthly payment of £937.37. That is an annual increase of £1537.20, or more worryingly £30,744 in payments over the remaining term of the mortgage. Many people with larger mortgage balances, a higher tax burden and increasing utility bills, with the prospect of inflation reaching 10%, will be even harder hit."
"It is very likely that rates will be higher but to put a level on them and not be in charge of the Bank of England is totally irresponsible. Sunak should leave his predictions at the door and all talk of interest rates to Andrew Bailey, who is in the proper position to make such comments. The judgement on how much rates need to increase to curb inflation is unknown. However, rate rises will in theory cool down house prices as transaction levels fall due to concerns about the increased cost financing a purchase."
"I called interest rates rising a year ago to combat inflation, many thought it would never happen, the state being too far in debt itself. I called stagflation as a very real possibility 6 months ago, more laughed that it would never happen, now it's being discussed in hushed tones in many a forum online. Rates are going to continue to increase until we bring inflation to heel and until we can persuade the nation to favour savings over borrowing. A recession is coming, and without the savings to bail us out, it will be a long one - and something we can ill afford off the back of the pandemic."
"We will see further rate rises this year, as sure as eggs is eggs. This week alone one high street lender has put up rates not just once but twice. If you are thinking about remortgaging to lock into a new rate, you really need to stop thinking about it and pick up the phone to your local broker to get the ball rolling now. Waiting even a week could cost thousands in extra interest repayments over the next few years."
Much higher interest and mortgage rate rises look almost certain over the coming year or so. With inflationary pressures at boiling point, and war raging in Ukraine, it's almost impossible to predict what will happen next. We've all the ingredients for a house price crash quite frankly. Overinflated, record house prices. Check. Deep recession looming... check. And the final nail in the coffin, absurdly cheap mortgage rates finally disappearing in the rear view mirror. Hold on to your hats!
"Mortgage rates have been at ridiculous lows ever since the Global Financial Crisis. They are now rising at a time when the cost of everything else is rising. The majority of working families currently on fixed rate mortgages should be able to ride out the storm in the short to medium term but anyone on a variable rate should be speaking to a professional as soon as possible. If not, they will be thousands of pounds worse off. Anyone hoping rates will miraculously drop in the next 24 months is in for a shock. Rates are only going one way for now, and that's up."
The prospect of interest rates hitting 2.5% by the end of next year is very real, barring another economic earthquake. Looking at it another way, if the pandemic had not happened we would probably have been not far off this level in any case given a strengthening economy, and whilst it is a big jump from where we are now, it is still at a low level in historical terms. Many borrowers will be shielded as they have taken advantage of a fixed rate mortgage product and whilst there will be some "payment-shock" when these products end, for many it will still be affordable, especially when comparing the rising costs of rents. It should be remembered that lenders have healthy balance sheets and money to lend, so there will be competitive pressure amongst lenders to maintain market share which should help to stave off some of the pain. That said, locking into a fixed rate sooner rather than later will help many to budget accordingly and remove sleepless nights.