UK’s largest mortgage lenders NatWest and Nationwide announce a further increase in interest rates
Cornerstone discusses the news that the UK’s largest mortgage lenders NatWest and Nationwide announce a further increase in interest rates.
NatWest and Nationwide, two of the UK’s largest mortgage lenders, have announced today that they will increase interest rates by as much as 0.45% while removing some of their mortgage products from the market altogether.
The move from the lenders, experts predict, is due to the financial markets reaction to the stubbornly high inflation data, which has changed expectations of how far the Bank of England will have to raise interest rates.
In light of this, David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax expert – assesses how this is set to affect homeowners across the UK.
This move from the British banks comes after nearly 10% of mortgages had been taken off the market at the weekend due to concerns about increasing interest rates, according to data from Moneyfacts. The figures indicate that approximately 800 residential and buy-to-let deals had been withdrawn, and average rates on two- and five-year fixed deals have also risen.
According to financial data firm Moneyfacts, the average two-year-fixed-rate mortgage has increased from 5.49% to 5.86% since the beginning of June. Similarly, the average five-year deal has risen from 5.17% to 5.51% during the same period.
Homeowners throughout the UK will have to spend nearly an extra £9 billion in interest over 2023 and 2024 as they are forced to refinance at rates that are double what they used to be according to the Centre for Economics and Business Research.
In total, 2.5 million homeowners will come to the end of fixed rate deals across 2023 and 2024 while a further one million are on variable rate deals.
The UK lending market continues to experience turbulent times, influenced by data revealing a slower-than-expected decline in inflation. This situation has led to predictions of a potential interest rate hike by the Bank of England, with estimates suggesting a rise from the current rate of 4.5% to as high as 6%.
David Hannah, Chairman at Cornerstone Group International, says:
“The rise in mortgage rates and mortgages being pulled by lenders due to inflation figures being stronger than expected is unwelcome news for homeowners, especially first-time buyers and those coming to the end of an existing deal.
“This is being done in anticipation of an expected rise in interest rates which will cause borrowers more issues when looking to purchase a property.
“Homeowners who are coming to the end of their fixed-rate deals will be looking at refinancing with rates that are more than double what they were a couple of years ago.
“If you’re finishing a deal with a rate of 1.5-2% and you’re going onto a rate above 5% that’s going to have a big impact on your budget.
“This means many homeowners will be unable to afford the extra interest and could even result in people losing their homes.
“This will also add further pressure to a rental market which has already registered record prices this year.
“We are already seeing record levels of unaffordability in the UK property market and lenders such as NatWest and Nationwide withdrawing mortgage deals is only going to further exacerbate the situation for potential buyers in the property market.”
Kindly shared by Cornerstone
Main article photo courtesy of Pixabay
