Thursday, November 21, 2024

Homeowners face £13k mortgage shock after Reeves’s Budget

Must read

It comes after more than two years of mortgage pain for homeowners, sparked by Liz Truss’s disastrous mini-Budget in 2021.

Last week, Jeremy Hunt, the former chancellor, warned Ms Reeves’s decision to tear up Britain’s debt rules would “punish families with mortgages”.

Lenders reacted with uncertainty to Ms Reeves’s announcements. While Virgin Money became the first to increase rates, Santander announced cuts across the board hours after the Chancellor finished speaking.

But because the OBR numbers take into account the whole market, including older rates, which tend to be lower, those taking out new mortgages will face higher loans.

The average rate on a five-year fix on Thursday was 5.09pc, while a two-year fix was 5.39pc.

A spokesman for industry group UK Finance said: “We are currently in a place whereby people have rolled off and are rolling off lower fixed rates and on to higher rates. That drives an increase in the average rate numbers.”

Adrian Anderson, a mortgage broker at Anderson Harris, said: “Mortgage borrowers have been subjected to very high mortgage rates over the past two years.

“It feels like there is some much-needed momentum coming back in the property market. It would be a shame if the Budget starts to reverse this momentum.“

The Bank of England hiked its base rate 14 consecutive times to 5.25 pc in August 2023. The policy was intended to rein in consumer spending and thereby tame inflation, which peaked at 11.1pc in October 2022.

The Bank Rate was cut to 5pc this summer, but it is expected that further cuts may be delayed as a result of the Chancellor’s decisions.

The Bank of England prohibits lenders from lending more than 4.5 times salary to more than 15pc of their total book, limiting how much can be done to help those on lower incomes.

Latest article