Enjoying the lush greenery of Ruskin Park in London, England on 11th June 2023, one can witness the contrasting landscapes of suburban residential properties and distant city high-rises. The image portrays the essence of a challenging situation that homeowners in the UK might face in the near future.
Photographer Richard Baker showcases this captivating picture in his collection “In Pictures” which highlights the stunning visuals of everyday life.
The Bank of England has issued a cautionary statement, warning homeowners who are already struggling, that they might witness a steep rise in their monthly mortgage repayments in the coming months. However, the bank emphasized that households today are not as heavily indebted as they were during the global financial crisis.
Currently, UK households are grappling with a cost-of-living crisis and higher interest rates, especially as their fixed-rate mortgage deals come to an end.
The BOE’s Financial Stability Report, published on Wednesday, reveals that over 2 million mortgage holders will experience a monthly payment increase ranging from £200 to £499 ($259 to $645) by the end of 2026.
Furthermore, nearly 1 million individuals are projected to observe their monthly mortgage costs surge by more than £500 within the same timeframe.
Although the amount of household debt remains below the historic peak reached in 2007, the BOE stresses the need for caution.
The concerns raised in the report coincide with a significant development – the average 2-year fixed mortgage rate in the UK has risen to its highest level since 2008. This increase has sparked fears of an impending “mortgage catastrophe.”
According to data provider Moneyfacts, the rate for a two-year fixed deal stood at 6.70% on Wednesday, surpassing the previous day’s figure of 6.66% and hitting a 15-year high.
Moneyfacts also noted that the average rate for a five-year mortgage reached 6.20% on Wednesday, which although a modest increase from the previous day, is still far from the 6.51% level recorded on October 20.
In recent years, most homebuyers in Britain have opted for fixed interest rate mortgages for a specific period, typically two or five years. Once their deal expires, they either secure a new fixed rate or switch to a variable rate.
Continuing Increase in Monthly Mortgage Payments
In the aftermath of 13 consecutive rate hikes, UK mortgage costs have witnessed a significant surge in recent months.
Notably, the BOE surprised many when it increased rates by 50 basis points to 5% in the prior month. This move is set to impact millions of homeowners as the interest rates on numerous mortgages in the UK are directly tied to the central bank’s base rate.
Unfortunately, renters are also likely to experience an increase in payments as buy-to-let landlords pass on the burden of higher mortgage repayments.
These measures are part of the BOE’s battle against persistently high inflation. Furthermore, Governor Andrew Bailey has expressed his commitment to see this battle through until prices stabilize.
Considering the circumstances, many analysts believe that further interest rate hikes are inevitable in the months to come.
“UK households are facing challenges from increased living costs and higher interest rates,” states the report by the central bank. “As fixed-rate mortgage deals expire and households renew their mortgages, the average cost of mortgage payments will continue to increase.”
Located in the City of London financial district, the Bank of England stands as a symbol of stability amidst economic fluctuations in London, Britain on January 26, 2023.
Photographer Henry Nicholls captures this impactful image, which gives an insight into the world of finance.
A recent study conducted by the National Institute of Economic and Social Research, a renowned independent think tank, predicts that the BOE’s 50 basis point hike will result in 1.2 million UK households (equating to 4% of households nationwide) exhausting their savings due to higher mortgage repayments by the end of the year.
The NIESR further states that this surge in mortgage costs will push the proportion of insolvent households to nearly 30%, affecting approximately 7.8 million households across the country. The greatest impact is expected to be felt in Wales and the northeast of England.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
