THE prospect of a young trainee or graduate being able to afford a home of his or her own has been bleak for several years and can only be bleaker now that the cost of mortgages is set to rise. HSBC is to raise mortgage rates for the second time in a week today. It withdrew its rates for new loans yesterday, saying the cost of funds has increased and it has had to reflect that in its lending rates. It is unlikely to be alone. Interest rates have risen from a record low of 0.1 per cent in December 2021 to the current 4.5 per cent. And in turn the average rate on a two-year residential fixed mortgage reached 5.9 per cent on Tuesday, up from 3.25 per cent a year ago. At least in the short term, the only way is up.
The economic effects of an increase will be felt more widely than in the housing market. Those whose mortgage payments rise will have less money to spend — and it is that discretionary spending which has bolstered, for instance, the drinks sector this season. Young employees in London who cannot even contemplate a home of their own face paying high rents, moving in with their parents (which may or may not delight both parties) or move out of London and spend much of their disposable income on fares. And this in turn will affect the number of workers available to fill vacancies.
