Mortgage costs rising at fastest pace

Permalink: Mortgage costs rising at fastest pace
by Kay Murchie

Ray Boulger of mortgage broker John Charcol said mortgage costs are soaring at their fastest pace ever.

Mr Boulger warned it is becoming much more expensive to take out a mortgage in spite of the Bank of England voting to keep interest rates at their current level.

Some of the UK’s largest mortgage lenders have announced increases in their rates with Abbey, Halifax and Chelsea Building Society hiking the rates on some of their mortgages. It is expected that other lenders will follow suit in the next few weeks.

Conditions in the mainstream mortgage market are now significantly deteriorating at a frightening speed. Lenders are changing their pricing and/or their criteria at the fastest pace in living memory and probably ever, said Mr Boulger.

Last week, the Bank of England’s monetary policy committee decided to hold rates at 5.25%. However, the interest rate on Abbey’s two-year fixed mortgage has increased from 5.67% to 5.89%. Borrowers taking out the average new home loan of £155,000 will have to pay £240 more a year.

A spokesperson for Abbey said we firmly believe that Abbey’s mortgage products continue to offer good value.

The rate on Halifax’s two-year fixed mortgage has increased from 5.67% to 5.77%. Its two-year tracker mortgage has been hiked up even further, from 5.74% to 5.99%. Soaring mortgage costs coincide with more evidence that property prices are falling.

Last week, the latest monthly survey by the Halifax established that property prices are continuing to slow down. The lender said prices across the UK fell by 0.3% in February, taking the annual rate of inflation down from 4.5% to 4.2%.

Ed Stansfield of Capital Economics, said worse is to come. We expect both economic growth and the labour market to show increasing signs of weakness.

We also expect the next four or five months to bring evidence that the house price correction is gathering momentum, concluded Mr Stansfield.