Analysts expect UK house prices to lead into prolonged stagnation
London (AFP) – Britain’s housing market has been battered by the British government’s extravagant budget, as retail banks dragged mortgage rates in anticipation of more expensive products, raising fears of a slump in house prices.
Homebuyers panic after the Bank of England announced that it will not hesitate to raise its key interest rate in response to the expected government borrowing boast that many see as fueling inflation.
– ‘Reckless week’ –
“It’s been a hot week for the mortgage market,” Sarah Coles, personal financial analyst at broker Hargreaves Lansdowne, told AFP.
Home loan providers, which offer mortgages based on a central bank rate, have canceled about 40 percent of available products since the budget on September 23, according to data provider Moneyfacts.
This equates to more than 1,600 mortgage rates being offered for a specified period of time.
Coles said “the market struggled to function normally” as the pound hit a record low against the dollar in the wake of the economic plan announced by new Prime Minister Liz Truss’ government.
The central bank reacted by launching emergency purchases of long-dated British government bonds as higher yields put pension funds at risk of collapse.
“Lenders have been dragging (mortgage) rates for new customers while they wait for the dust to settle,” Coles said.
“Once things get more efficient, they will come back but at a higher rate.”
Britain’s major bank Barclays said it was “withdrawing a small number of mortgage products from sale to new customers” due to high demand.
For some time, the average mortgage rate has been hovering around 2% for a two- to five-year repair, according to Moneyfacts.
However, the same mortgage deals are now close to five percent, more than double the monthly repayment costs.
– added costs –
Tom Bell, head of residential research at Knight Frank in the UK, told AFP that mortgage holders could find themselves paying “hundreds of pounds a month, which they would have to find”, adding to the cost-of-living crisis.
Canceling mortgage deals “is a bitter pill to swallow for those who want to move and those with specific terms about to expire,” said Tim Bannister, a principal at online real estate firm Right Move Real Estate.
“And that will affect buyers’ budgets, especially those who were already expanding themselves.”
The rising mortgage rates “have been brewing for some time,” said Richard Donnell, CEO of online real estate group Zoopla.
In less than a year, the Bank of England raised its interest rate to 2.25 per cent from a record low of 0.1 per cent in an attempt to cool decades-old high inflation.
Experts expect the Bank of England rate to peak near six percent in the first half of next year. Before the budget, market expectations had peaked at four percent.
– Home prices falling? –
Meanwhile, analysts expect UK house prices to head into a prolonged slump after rising recently as demand outpaced supply.
Housing loan company Nationwide revealed on Friday that the average UK house price rose 9.5 per cent in September compared to the previous year.
But prices were flat last month compared to August.
“The slowdown in house prices in September was a bit surprising given the mounting downward pressure on demand from higher mortgage rates,” said Andrew Wishart, an analyst at Capital Economics.
“This marks the beginning of the most significant home price correction since 2007,” when the global financial crisis began to unfold.
In his budget, Finance Minister Kwasi Kwarting raised the point at which residential property purchases are taxed — a feature that appears to have been eroded by faltering mortgage rates.
Auto Repair Shop in San Fernando Valley Destroyed by Fire An auto repair shop in…
Why autumn is the best time to visit Cornwall After three months of traffic jams,…
These are the Thai islands to visit instead of Phuket With miles of golden sand…
Devastating Russian Strike Hits the City of Poltava in Ukraine Located between Kiev and Kharkiv,…
Russian Strike Leaves Over 50 Dead in Poltava, Ukraine On Tuesday, a Russian bombardment targeted…
Russian Army Strengthens its Advance in Ukraine On Monday, September 2nd, the Russian army fired…