Inflation fears see MORE mortgage lenders hike prices

Inflation fears see MORE mortgage lenders hike prices: Virgin joins Halifax, HSBC, Barclays and NatWest in raising rates while analysts warn Bank of England could raise base rate interest NEXT WEEK

  • Mortgage costs expected to soar as lenders pull cheapest deals amid fears of an imminent interest rate rise
  • Virgin Money joining Barclays, Halifax, HSBC and NatWest have announced rate increases in past few days
  • Squeezed households are already facing a cost-of-living crisis, with inflation predicted to hit as high as 5%
  • Analysts now believe Bank of England could be forced to increase interest rates as soon as next Thursday
  • Mortgage costs are expected to soar as lenders pull their cheapest deals amid fears of an imminent interest rate risewith Virgin Money joining Barclays, Halifax, HSBC and NatWest in revealing rate increases since the Budget.

    Squeezed households are already facing a cost-of-living crisis, with inflation predicted to hit as high as 5 per cent -and analysts now believe the Bank of England could be forced to increase interest rates as soon as next week.

    It would be a major blow for millions of homeowners hit by higher monthly bills as a resultand follows mortgage rates plummeting to a record-low in the summer as banks and building societies fought to attract new customers.

    But since Chancellor Rishi Sunak‘s Budget on Wednesday, a series of major lenders including have all announced rate increases – e, after the weekend, there will no longer be any five-year loans priced under 1 per cento.

    Adding to the concerns, analysts at Capital Economics said that there is now ‘a high chancethe Bank of England will increase its base rate to 0.25 per cent next Thursday, and that it may then rise to 0.5 per cent in February.

    According to the OBR, rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cento a 0.75 per cent by the end of 2023. The forecasters said this would have a massive knock on effect on the amount of interest mortgage payers have to pay. They say it would see the amount people pay in mortgage interest soar by 13 per cent in 2023

    According to the OBR, rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cento a 0.75 per cent by the end of 2023. The forecasters said this would have a massive knock on effect on the amount of interest mortgage payers have to pay. They say it would see the amount people pay in mortgage interest soar by 13 per cent in 2023

    Forecasts produced by the Office for Budget Responsibility alongside Wednesday's Budget suggest rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cento a 0.75 per cent by the end of 2023

    Forecasts produced by the Office for Budget Responsibility alongside Wednesday’s Budget suggest rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cento a 0.75 per cent by the end of 2023

    Forecasters at the independent Office for Budget Responsibility (OBR) also issued a stark warning to homeowners, suggesting they could be facing the biggest increases in interest payments since the financial crisis.

    Its figures showed that rising inflation could prompt the Bank of England to increase base rate from 0.1 per cento a 0.75 per cent by the end of 2023. And in its worst-case scenario, rates could hit 3.5 per cento.

    What would a 13% rise in mortgage interest payments mean?

    The Office for Budget Responsibility said rising inflation may prompt the Bank of England to put up interest rates from the current 0.1 per cento a 0.75 per cent by the end of 2023. The forecasters said this would see the amount homeowners pay in mortgage interest soar by 13 per cent in 2023. This would be followed by a rise of 5.4 per cent the year after.

    VARIABLE-RATE MORTGAGES

    Analysis by the Liberal Democrats looked at how the average mortgage borrower on a variable rate mortgage had an interest rate of 3.26 per cent in August 2021, according to the latest Bank of England data.

    A borrower with an average-price house of £264,244 and a 25-year, 80 per cent Loan To Value (LTV) at this rate would see their monthly interest payment rise 13 per cent from £326.72 a month to £369.19 a month in 2023. That is an extra £42.47 a month or £510 a year.

    FIXED-RATE MORTGAGES

    A borrower on a 2 per cent fixed rate mortgage with a £264,244 home and a 25-year, 80 per cent LTV mortgage would be paying £191.52 a month in interest.

    UN 13 per cent rise in 2023 would see this hit £216.41 a month, so an extra £24.90 a month or £299 a year.

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    Figures from investment firm AJ Bell show that if base rate rises to 0.75 per cent this would add £50 a month – or £600 a year – to the cost of a £150,000 mortgage.

    A 3.5 per cento, borrowers would have to pay an extra £284 a month or £3,408 a year.

    The OBR figures also showed that the amount paid in mortgage interest could surge by 13 per cent in 2023.

    A confronto, the amount paid in mortgage interest fell by just over 2 per cento quest'anno.

    If the base rate rises, nearly a quarter of borrowers on variable mortgage deals would see an almost immediate increase in their bills.

    Borrowers on fixed rate loans would not have to pay anything extra until the end of their mortgage term.

    But mortgage costs for new customers taking out fixed rate deals are already creeping up.

    Barclays announced plans to raise its mortgage rates by up to 0.35 percentage points the morning after the Budget.

    A two-year fixed deal for borrowers with a 40 per cent deposit rose from 0.91 per cento a 1.26 per cento, adding an extra £288 a year to the cost of a typical £150,000 loan taken over 25 anni, according to broker L&C.

    TSB revealed rate increases of up to 0.35 percentage points just hours after Chancellor Rishi Sunak’s speech.

    It previously had the lowest two-year fixed deal on the market at 0.84 per cento, but this has now increased to 1.09 per cento, an extra £192 a year. The lender also withdrew all its three-year fixed offers.

    Virgin Money increased its rates on Wednesday evening by up to 0.25 percentage points, including some of its green home deals.

    Halifax and HSBC announced rate rises of up to 0.2 percentage points and 0.05 percentage points respectively just hours ahead of the Budget.

    And NatWest revealed a spate of rate increases of up to 0.1 per cent on Wednesday afternoon.

    Laura Suter, head of personal finance at AJ Bell, disse: ‘Homeowners need to be aware that it’s a case of when, non se, for an interest rate rise now and the clock is ticking on the record low mortgage rates we’ve all become accustomed to.

    This MoneySavingExpert analysis looks at how two-year mortgage and swap rates compare, going back to pre-pandemic

    This MoneySavingExpert analysis looks at how two-year mortgage and swap rates compare, going back to pre-pandemic

    The Institute for Fiscal Studies has said that over the next five years, real household disposable income is expected to grow by 0.8 per cento all'anno, which is significantly below the historical average. But growth had been weak in the decade before the pandemic began, meaning average incomes are now forecast to be 28 per cento (£9,000 per capita) below the pre-2008 trend

    The Institute for Fiscal Studies has said that over the next five years, real household disposable income is expected to grow by 0.8 per cento all'anno, which is significantly below the historical average. But growth had been weak in the decade before the pandemic began, meaning average incomes are now forecast to be 28 per cento (£9,000 per capita) below the pre-2008 trend

    Chancellor Rishi Sunak holds the Budget Box as he leaves 11 Downing Street in Westminster on Wednesday

    Chancellor Rishi Sunak holds the Budget Box as he leaves 11 Downing Street in Westminster on Wednesday

    ‘Anyone who signed up to a two-year fixed rate deal earlier this year will face a stark rise when they come to re-mortgage in the first half of 2023.

    What a rate rise means

    What is the bank rate?

    Also known as the base rate, this is the Bank of England’s benchmark interest rate that banks and other financial institutions use to price their loans and savings rates.

    Where is it now?

    The bank rate is still at an all-time low of 0.1 per cento, where it was cut to in March 2020, in order to help ward off pandemic-induced economic crisis. It has been at or below 0.75 per cent ever since the aftermath of the financial crisis in February 2009.

    Is it about to go up and why?

    Markets and economists think so. The Bank of England is supposed to set the bank rate to control inflation, and prevent it going above 2 per cento. però, as the economy has been in the doldrums for many years, inflation has not been a threat. This year however, with the sudden economic recovery from lockdown, the surging oil price and the various supply chain blockages it has returned with a vengeance. Inflation is now at 3.1 per cent and set to go higher. Money markets and economists say there is a good chance that the BoE could raise rates in November and almost certainly in December.

    What changed on Wednesday?

    Accompanying the Autumn Budget, the Office for Budget Responsibility forecasts showed inflation peaking at 4.4 per cent in the second quarter next year and to average 4 per cent over 2022. Rishi Sunak also said he had written to BoE Governor Andrew Bailey to remind him of the importance of controlling inflation.

    So rates are going up?

    Yes it is just a question of when and how much. Initial rises are likely to be cautious: solo per 0.25 per cent or 0.50 for the bank rate. It seems odds-on we’ll get a hike by the endof the year. The OBR warned that inflation could go even higher – sopra 5 per cento – and in in a worst-case scenario the implied interest rates that would be required to get inflation back down would be a bank rate of 3.5 per cento.

    What difference will that make to me?

    Even in the best-case scenario, mortgage rates will start to creep up and the best current mortgage deals will start to be pulled. If you are on a variable rate deal or a tracker you could see an increase in monthly payment very soon after any rate hike. If you are on a fixed deal then, you are protected until it expires. But it does mean some of the best deals that are around now might not be by the time you come to arrange a new mortgage.

    Cosa posso fare?

    If you are on a variable rate – especially if it is an expensive standard variable rate – you might want to think about applying for a two or even a five-year fixed rate while they are cheap. Those on fixed rate deals already can apply for a new rate six months before their mortgage expires so it might pay to start looking now.

    But at least savings rates will start to rise?

    We can hope. But it is really up to banks how quickly and how much they pass on rate rises in the form of better savings rates. Storicamente, they have been much quicker to hike mortgage rates than savings rates.

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    Andrew Montlake, of Coreco mortgage brokers, disse: ‘It looks like the era of ridiculously low rates is coming to an end. We may not see the like again in a long time.

    The housing price boom is also forecast to come to an end, according to the OBR report.

    But property prices are still expected to continue rising over the next five years, albeit at a slower pace of 3.22 per cent in 2022 e 0.9 per cent in 2023.

    Jo Thornhill, money expert at MoneySuperMarket, ha detto a MailOnline: ‘Warnings from the OBR about rising interest rates and inflation make for sobering reading, particularly for home owners with standard variable rate (SVR) mortgages who could see their monthly payments rise significantly if the OBR’s predictions play out.

    ‘If you’re looking to cushion yourself against the risk of price rises, it’s worth shopping around for a new mortgage deal. If you’re on a standard variable rate, consider moving onto a fixed rate deal.

    ‘Now is a great time to be doing this with a range of 1.5 per cento a 2 per cent deals available, while the past four months have seen the availability of deals with rates lower than 1 per cent quadruple.

    ‘There are good deals currently available for all types of homeowners whether you’re a first time buyer or re-mortgaging. E, as is always the case, the lower your loan to value rate, the more likely it is that you’ll be able to unlock some of the lowest interest rate deals.

    ‘Before switching, make sure you familiarise yourself with the terms of your existing mortgage and the one you’re considering. This is really important because changing providers can come with costs such as legal and booking fees. You should also think carefully about whether you can afford the monthly repayments.

    Analysis by the Liberal Democrats yesterdaylooking at a base rate to 0.75 per cento di 2023 – began by considering how the average mortgage borrower on a variable rate mortgage had an interest rate of 3.26 per cent in August 2021, according to the latest data from the Bank of England.

    A borrower with an average-price house of £264,244 and a 25-year, 80 per cent Loan To Value (LTV) at this rate would see their monthly interest payment rise 13 per cent from £326.72 a month to £369.19 a month in 2023. That is an extra £42.47 a month or £510 a year.

    Meanwhile a borrower on a 2 per cent fixed rate mortgage with a £264,244 home and a 25-year, 80 per cent LTV mortgage would be paying £191.52 a month in interest. UN 13 per cent increase in 2023 would see this rise to £216.41 a month, so an extra £24.90 a month or £299 a year.

    Separatamente, MailOnline looked at a doomsday scenario of interest rates at 3.5 per cento di 2023 under the OBR’s worst-case possibility. If mortgage rates were to rise by the same level as the base rate by 2023, and it was at 3.5 per cento, homeowners could be paying hundreds of pounds more a month.

    Per esempio, a household with a £200,000 mortgage on one of the cheapest rates available today, 0.9 per cento, is currently paying £745. Were the base rate to increase from 0.1 per cento a 3.5 per cent in 2023, and their mortgage by the same amount, the cost would rocket by £344 to £1,089.

    Lib Dem leader Sir Ed Davey warned that the expected rise is the biggest threat to homeowners since the 2008 crisi finanziaria. He said it could see them struggling to make ends meet with rising inflation and mortgage costs at the same time.

    Simon Gammon, managing partner of mortgage broker Knight Frank Finance, told the Financial Times: ‘We do expect interest rates to rise. Whether it’s this side of Christmas or just after, time will tell, but it’s imminent.

    ‘Therefore my advice to anyone who is looking to borrow or needs to review their mortgage product in the next six to nine months is do it now, because you could end up locking in a product that you won’t have access to at Christmas time or in spring. Now is the time to move.

    A Barclays spokesman said: ‘We regularly review our product offering and make changes – where necessary – to ensure we continue to deliver a high level of service to the mortgage broker community and their clients.

    ‘As a result of a recent review, some products across our Residential and Buy to Let ranges have seen price changes. These changes will come into effect from Friday, October 29.

    MailOnline has also contacted Virgin Money, HSBC, Halifax and NatWest for comment about their rate rises.

    We’re worried about our home loan, say musicians paying £1,200 a month on a two-year 2% fixed rate

    By AMELIA CLARKE

    Lucy and Matthew Knight (pictured with their one-year-old daughter, Darcey) fear they will be hit by rising inflation

    Lucy and Matthew Knight (pictured with their one-year-old daughter, Darcey) fear they will be hit by rising inflation

    With a current fixed mortgage rate of just two per cent, classical musicians Lucy and Matthew Knight worry they could be hit by rising inflation when the time comes to renegotiate.

    The couple are paying around £1,200 a month for their mortgage on their detached housemore than they were prior to the pandemic as they took advantage of a mortgage holiday.

    With interest rates predicted to reach 5 per cento, they fear it ‘would definitely have implicationsonce their 2 per cent fixed rate comes to an end in a year, as they would end up paying significantly more than they had planned to.

    Mrs Knight, 34, an English National Opera singer, disse: ‘We’re on a five year fixed rate mortgage so the inflation rate could affect us later down the line when re-mortgage.

    She and her 35-year-old husband, a trombonist for the Philharmonic Orchestra, lost all their income during the pandemic and started their own business, Treble and Trumpet, which records classical nursery rhymes for little ones, while stuck at home with their new baby, Darcey.

    With a house to renovate, soaring energy bills and the cost of living rising, la coppia, of Great Missenden, Buckinghamshire, were waiting expectantly to see if Government announcements would benefit them.

    Mrs Knight said it was ‘disappointingno green initiatives were announced, as running their household is not going to get any cheaper.

    They moved out of London and bought their current home aiming to renovate it to make it as eco-friendly as possible.

    They got as far as insulating and rewiring their new home before the pandemic hit and they were left without the funds to continue their project.

    Their electricity bills with renewable energy company Bulb have doubled in the last month and they had hoped to install solar panels in an attempt to reduce this. però, they have been holding off on the £8,000 to £10,000 expenditure.

    They had hoped for green home initiatives from the Government to aid them in their attempt to become more eco-friendly, but have been left without the help they were looking forward to.

    Mrs Knight said: ‘We weren’t eligible for the Self Employed Income Support Scheme as there were such strict guidelines, so we were part of the three million self-employed who did not get any help.

    ‘After a difficult few years where the music industry has been hit hard by the pandemic, we were hoping for green initiatives to make the cost of living cheaper in the long run and it’s disappointing.

    ‘During the pandemic we set up the business to work from home but with rising energy costs it would have been nice to see something from the government that acknowledges running a business from home costs more now.

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