Rising energy bills, rates and mortgages

ended 06. February 2022

A journalist at the Daily Telegraph wants to know what you 'orrible lot have to say about the impact of higher interest rates and rising energy (and other) bills on borrowers, both first-time and existing. Presumably, lenders will be factoring rising energy bills into their lending criteria so people will be able to borrow less? And rate rises will inevitably be fed through? How else could borrowers be hit? Deadline is just before Songs of Praise on Sunday, as I know you are all people of the cloth.

5 responses from the Newspage community

Star Quote
"The triple whammy of rising interest rates, a tax hike in April and sky-rocketing energy prices can only mean one thing: it will be harder to borrow. If, as we expect, mortgage lenders reduce their affordability parameters, this will impact the speed of house price rises because if borrowing is constrained, then so will any uplift in house values. However, some lenders are side-stepping FCA affordability rules by offering fixed for term products allowing them to avoid stress-testing new mortgages, which means that even with the rises already on the cards, affordability from those lenders is increasing. That said, be warned: the Lord giveth and the Lord taketh away, so while you get enhanced affordability, you'll likely pay a higher interest rate. As always, talk to a broker with a densely thatched facial ornament, and all will be made clear."
Star Quote
"More than ever, mortgages being approved is subject to affordability checks so if inflation is higher than wage growth, this can be a real issue for borrowers. The current spike in energy prices, coupled with broader inflation across the board, is squeezing many households hard, and without a doubt some of them will now find it harder to obtain a mortgage. The upcoming national insurance hike will hit people's income even more. Borrowing in 2022 won't be as easy as it was in 2021."
"The more borrowers are forking out on living costs and on servicing the mortgage itself, the less banks will be prepared to lend. So it doesn't matter how much 'pent up demand' there is. If people can't afford to borrow as much, property prices will fall. House price growth has been fuelled by years of ultra-cheap credit. That era looks to be coming to an end."
"Lenders will look at higher energy (and higher everything else) costs and this will inevitably reduce how much they are prepared to lend to both new and existing borrowers. Furthermore, with higher interest rates, lenders' stress tests will also reduce what someone can borrow. If borrowers are lucky, this will feed through to lower house prices, but don't hold your breath. The property market is anything but rational."
"It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear, and it absolutely will not stop, ever, until Boris gets a grip on the economy. Yes, inflation, that long lost adversary not seen since the early 1990, is back. With the cost of almost all good and services, including food, energy and interest rates surging, mortgage borrowers should certainly expect a Judgement Day for mortgage affordability assessments. Mortgage affordability dictates how big a mortgage you can get. Some mortgage lenders ask for specific costs at application stage, and some reference national average indexes. Either way, expect that as the cost of living rises, the amount you can borrow will reduce. The ultimate impact here is that first-time buyers will find it harder to get onto the property ladder, and existing home owners will feel their already stretched earnings squeezed harder each month. Hasta la vista to the days of super cheap borrowing."