Britain’s biggest mortgage lender Halifax has piled more cost of living pain on homeowners by increasing the cost of most of its fixed-rate deals by more than a percentage point.
The rises, which come after Kwasi Kwarteng’s botched mini-budget brought turmoil to financial markets, mean that owners face substantial increases in their costs when they move or remortgage. For first-time buyers it will make it even more expensive to climb on the housing ladder.
Deals that were at historic lows close to one per cent a year ago are now well over five per cent in most cases. Lenders say they have been forced to move by dramatic rises in so called swap rates last week in expectation of a big hike in the Bank of England’s benchmark lending rate on November 3.
The interest rate on Halifax’s two-year fixed deal for buyers with a 40 per cent deposit rises from 4.56 per cent to 5.84 per cent, lifting monthly bills on a typical £300,000 mortgage in London from £1,677 to £1s,903.
Those with a 10 per cent deposit will see their rate go up from 4.7 per cent to 5.99 per cent. Buyers with only a five per cent deposit will have to pay 6.39 per cent.
A Halifax spokesman said: “We continue to have a range of fixed rate product terms available. The new rates reflect the continued increase in mortgage market pricing over recent weeks.”
Hundreds of mortgage deals were pulled from the market last week during the chaos that gripped the gilts market after the Chancellor’s statement on September 23. Lenders are gradually returning to the market but with big increases in prices.
On the morning of the Chancellor’s speech the average rate on a two year fix was 4.74 per cent but now it is 5.97 per cent. A five-year fixed deal has typically risen from 4.75 per cent to 5.75 per cent over the same period.
About three quarters of all mortgages are on fixed rates but about 1.8 million nationally and around 300,000 in London are due to end next year.
In more bad news, homeowners in London were warned today that they face two years of falling property prices following the financial turmoil triggered by the mini-budget. The arrival of far higher-than-expected home loan rates has led analysts at respected property advisers Knight Frank to downgrade their forecasts for the London property market both for 2023 and 2024 as the impact reverberates through the economy.
It is now expecting a fall of around 10 per cent by the end of 2024 — the expected time of the next general election — with a drop of about six per cent next year and four per cent in 2024.
Tom Bill, Knight Frank’s head of UK residential research, said: “We now think there will be mid single digit declines in 2023 and 2024 — we are looking at the ballpark of 10 cent in the next couple of years. That will take pricing levels back to the level of last summer. In our previous forecast we were saying London would be broadly flat next year.”
Some brokers have also expressed concern that first-time buyers offering a five per cent deposit could find it more difficult to find a deal.
Ian Hewett, founder of The Bearded Mortgage Broker, told the BBC: “The 95 per cent loan-to-value mortgage won’t die, but there will almost certainly be fewer of them due to the current economic situation.”
