Millions of mortgage holders are facing uncertainty in the coming months after the Bank of England raised interest rates again. The bank raised its base rate by half a percentage point to 5% on Thursday - a 15-year high.
The bank said the increase - the 13th in a row - was aimed at combatting stubbornly high inflation, which remained at 8.7% in May, far above the target figure of 2%. It has not ruled out further hikes and said it would "monitor closely indications of persistent inflationary pressures in the economy as a whole."
The situation leaves millions of homeowners and first-time buyers facing an uncertain future, with the increase likely to lead to higher mortgage rates for those looking to buy and potentially massive hikes in monthly payments for those coming off existing deals. You can get more story updates straight to your inbox by subscribing to our newsletters here.
There is much uncertainty in the market, with mortgage deals disappearing from the market frequently and causing difficulties for buyers. Speaking on BBC Radio Wales this morning, Mike Powell from Mike Powell Mortgages in Caldicot, said some customers were being left with as little as 30 minutes to choose a deal before it vanishes off the market.
"As brokers we are trying to start a petition that we need a minimum of 48 hours," he said. "You're asking clients to make massive decisions in half an hour or an hour's time. You'd spend more time choosing a holiday than you would at the moment trying to decide if this deal is best for you.
"For people who are in work, they can't make these decisions or they can't get access to a phone to phone you. Or by the time they do that, or by the time they've spoken to their partner, that deal could have gone."
Ian Rogers, company owner at C A Mortgage Services Ltd in Blackwood, told WalesOnline that the situation was "gloomy" for many homeowners coming out of deals as well as first-time buyers. "If you're a first time buyer then basically it's going to be a lot more expensive than it was 12 months ago," he said. "That affects the lenders' affordability calculators. As brokers we tailor a mortgage around that and give clients a range of prices to look at and some sort of idea of what the monthly payments will be.
"The people coming out of low rate, fixed deals, this is where it is really gloomy. The average price in our area in south Wales is an increase in monthly payments of between £150 and £300."
Mr Rogers explained that the rates set by mortgage lenders were in part dictated by 'swap rates', the fixed rate that a party to a swap contract requests in exchange for the obligation to pay a short-term rate.
"They are what the lender can buy the mortgage for themselves," he said. "The lenders have to spend more money for them and pass that on to the clients. But the margins are very fine. You can see a mortgage bought at 5.5% and that's why you see rates of, say, 6%.
"Swap rates went crazy when Liz Truss did what she did, the markets didn't know what was happening. When the market gets nervous, that's when swap rates go up. Some lenders may have already factored in today's increase in interest rates into their own prices."
Mr Rogers said swap rates would likely go down when "the situation in the country gets better" and that the Bank of England was raising interest rates in a bid to stop people from spending as much money. "If we go into a recession, which I personally think we will, you will probably see a property price crash. That would be much better for first time buyers because houses would be cheaper.
"We are in a very odd position at the moment, one I've never seen before. If inflation comes under control it will get better. Gas and electric and other factors are important. When food starts coming down we will start seeing a difference."
He said anyone worried about affording their mortgage in the short term would need to speak to their broker or lender who might be able to help, or perhaps reconsider if now was the right time to get a mortgage if they're a first-time buyer.
"What our advice always is, if anybody is looking at a mortgage, I've always asked them, could they afford it if it went up to 6%? If the answer is no, then you need to think about whether you should even be thinking about a mortgage or saving more for a deposit at the moment," he said.
"Their considerations are if they can't are to see if they can extend the term for a few years, which isn't viable really. What I would say to anyone who thinks they are going to be in financial difficulty [paying their mortgage], is to talk to your lender, talk to your broker, all the time. Rather than this emu affect of sticking their heads in the sand thinking it won't happen to them. They don't want to have to repossess your home, so make sure you talk to them."
Mr Rogers said he would generally not advise people to take out longer-term fixes despite the current uncertainty, but added that it ultimately came down to a number of factors including customers' attitude towards risk.
"Traditionally, a two-year fix would cost more than a five or ten-year, whereas now it's the reverse. That would lead me to believe the banks think rates are going to come down, otherwise they wouldn't be offering those rates. I wouldn't personally be recommending people fix for five years. You see people doing that and then rates come down over time, and you have lost out. So much can happen in five, ten years."
Despite the current outlook, Mr Rogers said he believed the situation was short-term and would soon level out, at which point rates would start to come down.
"I would think this is the last of it. We may have a rest for a while and the next one may even be a drop in the rate. Once that happens people are a bit more confident. It's pretty much back to 2009. It was a different crash but I think this is short term myself. But we have got to get inflation down first."
