LONDON (CU)_Borrowers in the United Kingdom were warned last month that the era of ultra-cheap mortgages may be nearing the end, with the government’s independent forecasters projecting a rapid rise in costs over the next couple of years. Inflation predictions published by the Office for Budget Responsibility (OBR) in late-October, suggested a 5.6 per cent increase in the cost of servicing a mortgage next year, followed by a 13.1 per cent hike the year after, as lenders pass on increases in the Bank of England’s base rate to borrowers.
Against this backdrop, financial service providers are pull their lowest-cost deals in preparation for a hike in interest rates, leaving home loan customers on the edge. Households that have taken mortgages in the UK are also dealing with recent increases in other living costs and remain anxious over their how to meet their monthly bills. “Everyone is extremely on edge about the rate rise,” Rachel Neale from UK Mortgage Prisoners, a campaign group working towards a fairer mortgage rate for all, said. “These people are already struggling. Some are using food banks, some are facing repossession.”
Until recent months, customers with a sizeable deposit were able to secure a five-year mortgage deal at a rate below 1 per cent, while the average fixed-rate for a 10-year deal fell to only 2.36. Still, this was nearly half of the rate paid by those stuck on standard variable rates (SVRs), at about 4.39 per cent. Experts widely project the BoE’s base rate to rise from 0.1 per cent to 0.25 per cent over the next couple of months, which will increase the monthly home loan bill on a £150,000 mortgage by about £12, and this figure will increase by £71, if the base rate goes up to 1 per cent.
