Homeowners face even more mortgage woes as markets predict interest rates could hit 6% by year end
Homeowners faced further mortgage problems yesterday as markets predicted interest rates could hit 6 percent by the end of the year.
It came after official data showed UK wages rose at their fastest pace ever outside of the pandemic in the three months to April.
Median wages excluding bonuses rose 7.2 percent during this period, according to the Office for National Statistics (ONS) — though wages fell 1.3 percent in real terms due to inflation.
The jump in wages shook nerves at the Bank of England, which has previously warned of large wage increases for workers that could fuel price increases.
This phenomenon is known as a ‘wage-price spiral’ and increases the pressure on the central bank to raise interest rates to control inflation.
Markets predicted interest rates could hit 6 percent by the end of the year [File image]
But while higher rates are good news for savers, mortgage holders are faced with increasingly higher repayment costs.
Santander this week became the latest major lender to temporarily halt its new mortgage deals due to “market conditions.” The higher costs of mortgages are also hitting the rental market, with landlord profits at their lowest level in 16 years.
Estate agents Savills warned there was a ‘real risk’ that pressure on incomes could push more landlords to sell.
The Bank of England has raised interest rates 12 times since December 2021, when it stood at 0.1 percent, in an effort to curb inflation.
Another rate hike could come next week, with financial markets predicting the Bank will raise rates from 4.5 percent to at least 4.75 percent, the highest level since 2008.
They also predict rates will be at least 5.75 percent by the end of 2023 and could reach as high as 6 percent for the first time since early 2001, according to data platform Refinitiv.
David Hollingworth, of L&C Mortgages, said yesterday’s data would be “no comfort to mortgage borrowers”.
“It will add more upward pressure… and exacerbate an already fast-moving market,” he added.
A third of voters blame the government for skyrocketing interest rates, a YouGov poll found. Chancellor Jeremy Hunt said yesterday: ‘We are very aware of the pain many families are feeling.
“The most important thing we can do to ease the pressure on families is to support the Bank of England in fighting inflation and that is the number one priority.”
Downing Street said lenders should be prepared to help mortgage holders struggling because of rising interest rates.