A warning has been issued for anyone who hasn’t fully paid off a mortgage. Mortgage rates are set to skyrocket, experts are warning, after UK borrowing hit a 27-year high amid pressure on Labour Party Chancellor Rachel Reeves.
Rates on new fixed-rate mortgages could start to creep up as a result of the bond market turbulence as lenders get funding for loans from the money markets. Stuart Cheetham, chief executive of MPowered Mortgages, warned: “Although some lenders, including us, have reduced mortgage rates, these reductions are likely to be short-lived.”
Paul Dales, chief UK economist at Capital Economics, warned that mortgage rates could climb from around 4.5 per cent in December to just over five per cent in the coming weeks. Anita Wright, a chartered financial planner at Bolton James, said: “The UK is trapped in a vicious debt circle. The bond market is saying, ‘We’re pretty certain a second wave of inflation is coming back, similar to the 1970s.'”
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Russ Mould, investment director at pensions firm AJ Bell said he “wouldn’t be shocked” if the Bank of England decided not to cut rates in February, when the next decision is due. Darren Jones, the Treasury chief secretary, told MPs the chancellor would not borrow to pay for day-to-day spending despite rising costs.
He said: “There should be no doubt about the government’s commitment to economic stability and sound public finances, this is why meeting the fiscal rules is non-negotiable.” The Office for Budget Responsibility (OBR) has yet to capture the financial market data used in its forecasts and will do so closer to 26 March – leaving time for conditions to subside.
“A lot will depend on what materialises on or around 20 January,” said Mohamed El-Erian, a former International Monetary Fund deputy director who is now the president of Queens’ College, Cambridge.