average two-year fixed mortgage rates have just hit a 15-year high of 6.66%.
UK two-year fixed mortgage rates hit highest level since 2008Read more
Here’s what to expect, from the committee:
The cross-party Committee of MPs will examine the current state of the mortgage market, including levels of mortgage stress, arrears and forbearance, and the outlook for the market in light of higher interest rates.
The Committee will question mortgage providers on consumer behaviour following recent rate rises, the impact on house prices and the wider housing market, and mortgage affordability and availability.
Government support schemes and the recently agreed ‘mortgage charter’ are also likely to be discussed, as are buy-to-let mortgages and the rental market, and the take-up of long-term fixed rate deals.
Here’s the panel:
Andrew Asaam, Homes Director, Lloyds Banking Group
Bradley Fordham, Mortgage Director, Santander UK
Charlotte Harrison, Interim CEO (Home Financing), Skipton Building Society
Henry Jordan, Home Commercial Director, Nationwide
Nigel Terrington, Chief Executive, Paragon Banking Group
Time for a recap.
UK borrowers continue to be hit by rising interest rates as the fight against inflation continues, and there may be more pain ahead.
Average two-year mortgage rate have risen over their peak last autumn, averaging 6.66% today for the first time in 15 years.
UK two-year fixed mortgage rates hit highest level since 2008Read more
MPs have heard that rising mortgage rates are causing financial stress to customers, and that the situation will worsen. However, lenders also reported that they have not seen a significant pick-up in arrears yet.
Bradley Fordham, mortgage director at SantanderUK, told the Treasury Committee the bank had seen a “small tick up in arrears, still 20% below pre-pandemic, 70% below 2009 post-financial crisis, so relatively low levels”.
He said mortgage customers coming off deals and going onto new ones were seeing payment increases of “over £200 per month”.
But, the UK could be approaching a ‘tipping point’ where mortgage rates rise to levels where borrowers cannot fully protect themselves by extending the terms of their loans or moving to interest-only deals.
The International Monetary Fund warned that UK interest rates may need to keep rates higher for longer, to fight inflation.
The financial markets are anticipating that UK interest rates will hit 6% by November, up from 5% at present.
The latest labour market report has shown that UK wages increased at a faster rate than expected in May.
Earnings growth hit 7.3% in the three months to May compared with a year earlier, driven by the strongest rise in private sector pay growth outside the pandemic period of 7.7%, the Office for National Statistics said. It was the joint highest since modern records began in 2001.
Record UK pay growth adds to pressure for interest rate riseRead more
And with unemployment rising, number of job vacancies down, jobs growth slowing and more people looking for work, there are signs that the UK labour market is starting to slow.
UK interest rates likely to rise again despite slowing labour marketRead more
And in other news…
Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.
UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialistRead more
Britain’s retailers recorded a sharp rise in spending in June as hot weather prompted consumers to buy summer clothing and outdoor goods, despite growing pressure on budgets from the cost of living crisis.
UK retailers report sizzling sales in hot June weatherRead more
Morrissey has written to Jet2holidays urging the tour operator to drop its association with marine parks that continue to use captive orcas and dolphins for entertainment.
Morrissey: Jet2holidays must cut ties to marine parks over orcas and dolphinsRead more
Rate cut expectations are gaining momentum as Brazil's annual inflation reaches its lowest point in almost three years.
— Roensch Capital News (@RoenschNews) July 11, 2023
Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.
Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.
“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.
UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialistRead more
mortgage costs hitting their highest level in 15 years with an average rate of 6.66% will worry people further, at a time when “mortgage pressures on ordinary households are huge”, says Douglas Chapman, SNP MP for Dunfermline and West Fife.
Following today’s Treasury Committee hearing on the mortgage market, Chapman says:
Research this month from Citizens Advice Scotland reveals that around 11% of people always run out of money before payday, with a further 14% saying that this happens to them “most of the time”.
This percentage will surely rise given today’s Committee panellists’ discussing averages of £235 increases on monthly mortgage repayments due to large interest rises and deals coming to an end, which on top of a crippling cost of living crisis, consistently high energy prices and rampant inflation explains why many people feel their financial resilience is being pushed to the limit.”
“In addition, there was little encouragement for first time buyers today, who it appears need to spend longer amassing a larger deposit or tap into the Bank of Mum and Dad (which isn’t an option for everyone), and then also choose from a narrower portfolio of smaller properties in order to meet monthly mortgage payments and pass banks affordability stress tests.”
the increase in fixed-rate mortgage costs today is a sign of “Tory economic failure”
“Too often, families who are saving for their first home but getting no closer to buying it feel like they’re doing something wrong.
“But the fact of the matter is that the Tories have inflicted households with a mortgage bombshell, let renters down and failed to build the homes we need.
“Millions are feeling the pain from this Tory economic failure.
“Labour has a plan to start fixing this crisis. We would stop households missing out on the mortgage support they need by making measures mandatory, we will give greater rights and protections to renters, and we will take the tough choices to get Britain building.”
A chart showing Nationwide house prices
Andrew Asaam from Lloyds Banking Group told MPs house price falls could leave some mortgage holders in negative equity (owing more than their property is worth).
But MP also heard there is less risk than in previous financial crisis, as loan-to-value rates are relatively low.
Asaam told the Treasury committee this morning
“The place that this probably bites most is for first-time buyers, who will be typically at higher LTVs (loan to value rates).
“It’s a completely individual situation, but we still think owning a home for most people is better than renting.
“And therefore we want to keep products available at higher LTVs for first-time buyers.
“But we need to make sure that those first-time buyers are resilient, ie they can afford to stay in their homes through a two-year period where house prices might be falling, for example, and they are aware that they could end up in negative equity.”