Could average fixed rate mortgages reach 7%

While speculations suggest 7% rates are possible, one needs to look at key indicators such as inflation, central bank policies, the RPI and the overall economic climate over the next quarter to ascertain these.

To stimulate the market further, the government can take proactive steps. Firstly, providing stability is crucial. Avoiding sudden policy changes and ensuring a predictable environment will instil confidence among property buyers and investors, including landlords like ourselves.

Addressing supply constraints is the second essential aspect. By incentivising developers to increase the supply of affordable housing and streamlining the planning process, the government can create a more favourable market environment that counteracts the higher interest rates. Investing in infrastructure projects, particularly in areas with high housing demand, is crucial the government needs to look at.

Fixed interest rates have to hit 7% in order to get inflation under control. It is a heavy handed, painful approach for the majority but it is a tried and tested pathway to controlling inflation.

Ideally, the pain is short, but the basic principles of reducing disposable income to the point of despair in order to curb spending and cool inflation must be an all or nothing approach.

The best to hope for here is a sharp increase in costs which should coincide with a sharp drop in house prices. Once this happens interest rates can be safely managed down to a level that is manageable for borrowers, fair on savers and brings inflation closer to the 2% target.

The worst thing the Government can do is intervene with mortgage holidays and other measures to protect borrowers as this will water down the impact leaving us with high interest rates, high inflation and not much to show for it.

Fixed interest rates have to hit 7% in order to get inflation under control. It is a heavy handed, painful approach for the majority but it is a tried and tested pathway to controlling inflation.

Ideally, the pain is short, but the basic principles of reducing disposable income to the point of despair in order to curb spending and cool inflation but it is all or nothing.

The best to hope for here is a sharp increase in costs which should coincide with a sharp drop in house prices. Once this happens interest rates can be safely managed down to a level that is manageable for borrowers, fair on savers and brings inflation down closer to the 2% target.

The worst thing the Government can do is intervene with mortgage holidays and other measures to protect borrowers as this will water down the impact leaving us with high interest rates, high inflation and not much to show for it.

If mortgage rates hit 7 percent we'd be staring down the barrel of a disaster. Consumer spending would fall off a cliff, house prices would collapse and a severe recession would be likely. To be honest, if mortgage rates stay around six percent much longer, things will still get pretty bad.

That said, my gut feeling is that as soon as both the headline and core inflation rates start falling significantly, then swap rates and mortgage rates will reverse quite sharply. But Andrew Bailey and the Bank of England are hardly inspiring confidence, so when that happens is anyone's guess.

It is highly likely that fixed rate mortgages will increase to 7% in the near future, potentially by the end of 2023, especially if inflation remains unchecked. The Monetary Policy Committee (MPC) has already indicated the possibility of further interest rate hikes, and it is crucial not to disregard their warnings.

With Halifax showing rates of 6.6% (as of today) it is completely possible that we will see 7%, and soon!
From my conversations with clients this week I am very fearful for people if these fixed deals continue to climb. Perhaps the government are thinking everyone has been sitting around with bundles of disposable income for the last few years, but the reality is that most haven't. For an average family with commuting costs, rising food bills, utility bills through the roof, childcare etc, it is already difficult. Throw in an extra £400-£500 per month on their mortgage payment and people are hitting breaking point.

I do not personally see average interest rates going above 7%, although the last few years have seen drastically low interest rates which made rates rising to 4-5% see very high when in reality this was more normal taking into account the average rate over the last 25 years has been 5.6%. The reason I don’t think rates will go above 7% is because it would just be completely unaffordable, we can argue and say that rates have been this higher/ higher in the past but the last time they were 7% or higher was 2005 and the cost of living has gone up massively since then whilst wages have stagnated. I think if the average rate did increase to 7% this would cause such a quick decline in the housing market that the government would be forced to step in and lower base rate to keep things afloat.

Quite simply the question to ask yourself is, 'would a sane government let this happen with an election next year and face political annihilation?'

You could then also ask 'whether we have a sane government?'

With the Bank of England base rate forecast to be over 6% it is absolutely a possibility that we could see rates of 7%.

People who are having to remortgage now are already feeling the pain of increased payments and many more who come off of their fixed rates in the next few months will feel the impact of this.

Mortgages were stress tested at 7% by many lenders but that was before the cost of living crisis and there are many of those mortgages that would now be deemed unaffordable.