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Mortgages

Journalist: Becky Bellamy, Mortgage Strategy and Mortgage Finance Gazette

ended 18. August 2022

With Bank of England rates set to reach between 3 and 4% by the end of the year, how can borrowers deal with this price shock? And how likely do they think this is to happen?

3 responses from the Newspage community

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Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
If the Bank of England hikes the base rate to 4% many borrowers will really struggle to pay their mortgages. It would be a real double whammy along with the energy increases. New business mortgage rates would probably be well over 5% and as a result, the housing will suffer. Many people in the industry understand that inflation needs to be controlled but they do not think it makes sense to strangle the housing market and wider economy. Many borrowers will have to reduce their outgoings although many are already taking second jobs to make ends meet.
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Marcus Wright
Managing Director at Bolton Business Finance
If the base rate hits 4% this year, there could be major economic hardship for many homeowners like we have not seen for a long time. However its not clear that this will definitely happen, if inflation begins to level or come down the BOE may hold off. Also its not just homeowners that are hit, landlords seeing higher mortgage payments will likely increase rents. Businesses with higher interest payments on debt may also look to pass costs on. If the base rate keeps going up along with energy bills, we could be in for a very tough winter!
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Jonathan Burridge
Founding Adviser at We Are Money
I am not sure that we will see base rate hit those levels as quickly as the end of 2022, but, think it the odds of further rises in the coming months are high and we will bounce up and down during 2023 until we find a new level. I struggle to support a view that Base Rate will return to its recent lower levels - but, frankly it is anyones bet. Most mortgage borrowers are in fixed rates, but, they do need to start to look at their plans. Lenders have moved to issuing offers that are vaild for six months, so, it is possible to start the process seven to eight months early with a mortgage adviser, taking advantage of rates before possible further rises. Extending the mortgage term may help bring the cost down on a monthly basis (although it will likely mean paying more over the total longer term). Considering saving costs on unsecured loans or credit cards by consolidating debts whilst property values are stable.