Afternoon summary
A quick recap…
The cost of a two-year fixed-rate mortgage in the UK has risen above 6 per cent today for the first time this year, as thr turmoil in the property sector continued.
Average two-year fixed mortgage rates hit 6.01%, from 5.98% on Friday, financial data provider Moneyfacts reported.
The rise came as investors anticipate another increase in Bank of England base rate on Thursday, probably from 4.5% to 4.75%.
The financial markets now believe there is a greater than evens chance that UK interest rates hit 6% by early next year.
UK government borrowing costs continued to climb, with the two-year gilt yield hitting 5% for the first time since 2008. That will put further upward pressure on mortgage prices.
OOPS! UK 2y yields jump >5% for 1st time since 2008 ahead of the Bank of England's interest rate decision this week. Markets are pricing in another rate hike to 4.75%. The terminal rate is assessed at 5.8% for the March 21, 2024 BoE meeting. pic.twitter.com/AF30czDSo6
— Holger Zschaepitz (@Schuldensuehner) June 19, 2023
Increased borrowing costs have prompted some lender to withdraw deals, while other products have been repriced with higher interest rates in the last month.
Rising interest rates means people looking to remortgage their homes will pay an average £2,900 a year more from 2024, the Resolution Foundation think tank predicted.
But despite the squeeze, prime minister Rishi Sunak sounds unwilling to provide specific help for mortgage holders.
Speaking on ITV’s Good Morning Britain, Sunak said:
“I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.
Consumer champion Martin Lewis accused chancellor Jeremy Hunt, and UK banks and regulators, of missing the opportunity to agree protections for mortgage holders before rates surged.
They can't say they weren't warned!
— Martin Lewis (@MartinSLewis) June 19, 2023
Last Autumn, I raised an alarm about a coming potential mortgage ticking time bomb with millions facing huge bill-shock as their fixes end.
So much so the Chancellor called a mortgage summit; sadly it was just a missed opportunity talking…
Asking prices for British homes fell in June for the first time in six years, as rising interest rates hit the markets and dragged forward the usual summer slowdown.
But retail chain Next has lifted its profit forecasts, reporting that sales have been much stronger in recent weeks than expected. It attributed this increase to the better weather (more demand for summer clothes) and recent pay rises…
And in other news:
Updated
Truss: Media's understanding of economic ideas is very poor
Former UK prime minister Liz Truss has been sharing some little gems of wisdom from her time in office.
Speaking at the European Broadcasting Union’s NewsXchange conference in Dublin today, Truss argued that the U.K. was, and still is, in “serious economic trouble”, Politico reports.
Truss, who left office after 45 days after her government’s mini-budget backfired, causing turmoil in the markets, said she needed to be “bold” to reverse declining economic growth.
She admitted she lacked support from Tory MPs and “could have gone a bit slower” with her economic reforms.
But Truss also criticised the UK media’s coverage of politics, saying:
“I do think sometimes politics is sort of treated as a branch of the entertainment industry, who’s up, who’s down, who says what about who.
“I think the level of understanding of economic ideas in the media and the ability to explain them is very poor indeed.”
Former UK PM Liz Truss admitted today at the News Xchange conference in Dublin that she made a "series of mistakes" during her time as PM, but blamed her downfall on the media's "poor understanding" of economics. #NewsXchange #EBU @trussliz pic.twitter.com/mazUNgOBQS
— News Xchange (@NewsXchange) June 19, 2023
““I think the level of understanding of economic ideas in the media and the ability to explain them is very poor indeed”
— Neil Robertson (@NeilDRobertson1) June 19, 2023
A quote from Liz Truss - that famous giant of the economics world!😀#ToryBritain
The pound hit a record low in the aftermath of Truss’s mini-budget, as traders were concerned by the package of unfunded tax cuts announced by chancellor Kwasi Kwarteng.
UK bond yields jumped, but then recovered some ground after the Bank of England launched an emergency intervention last September.
Updated
