Key Points
- The housing sector in the U.K. has been heavily impacted as interest rates hike pushes mortgages to multi-year record highs.
- More pain is expected as the inflation rates in the country are still high and need more action from the Bank of England.
- The average level of the two-year fixed deal stands at 6.66%
Mortgage rates are spiking in Britain following tough economic times and decisions from the European Central Bank and the Bank of England. The country has been experiencing record-high inflation rates that have necessitated the introduction of higher bank rates, which have raised living costs.
Mortgage rates are expected to rise further in the U.K.
More pain is expected in the British housing markets after mortgage rates have skyrocketed despite inflation remaining malignantly high. The Bank of England is expected to keep hiking interest rates to avoid embedding inflation.
A key mortgage rate went up on July 11, showing that the 2-year fixed deal now stands at 6.66% per figures provided by Moneyfacts. This increase marks a 15-year high record of the specific housing mortgage deal. It had hit a closer 6.65% increase in October 2022 following the defunding of tax cuts in the mortgage market.
In the same report, the 5-year mortgage rate rose to 6.17%, a marginal increase from the past days but still lower than the 6.51% level reached in October 2022. These mortgage rates are expected to rise even further following the need for more interest rate hikes from BoE.
Britain’s economic outlook becomes worse than previously expected
Britain had expected its inflation rates to fall below 2% by the end of the year, a target that keeps getting shadowed each day the deadline approaches. It seems increasingly unlikely that the Bank of England will hit this target without pushing the economy into a recession.
Figures from earlier today show that wage rates are spiking in the country, and a housing sector meltdown is imminent. These are signs of a deteriorating economy. And sadly, there are still no signs of the British economy hitting a turnaround soon. Therefore investors should brace for impact and choose less risky investment options in the country.
Keep watching Fintech Express for more updates on this and other fintech-related developments.