Consumers feel the pain as mortgage rates continue to rise
42The credit crunch on Thursday forced three of the UK's biggest lenders to tighten the supply of home loans and charge more for them in moves that are likely to put further pressure on the property market.
Millions of home loan borrowers now face higher interest rates as banks pass on higher wholesale funding costs as conditions worsen in money markets.
Home loans will also become harder to secure from Friday, even for those with unblemished credit records, as banks apply more stringent criteria to mortgage approvals and pull some competitive products to avoid being flooded by new applications. More than 2.75m people will be hit when they come off any sort of mortgage deal this year - whether it is a tracker or fixed-rate deal. Nationwide, the UK's second largest mortgage lender, increased interest rates on one of its main products to deter new borrowers by making them less attractive. It will increase the cost of two-year mortgage tracker rates for new customers by 0.57 percentage points to 7.1 per cent and is increasing its fixed rate mortgages by 0.2 percentage points.
Cheltenham & Gloucester, part of LLoyds TSB, increased the prices of certain two-year tracker rates by about 30 basis points, as did IF, a subsidiary of HBOS.
The moves will be a blow to consumers who are due to refinance mortgages this year and face a sharp jump in monthly payments.
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Comments
Hi Suok3,
It is scary, really scary. The dollar and the £ are being made worthless by the central banks pumping billions into the system to try and ease liquidity issues. More money in the system means higher, faster inflation, making your money worth less.
As far as homeowners are concerned, even as house prices drop there will be less people buying for 2 reasons.
Firstly, property has proven not be a failsafe invetsment. Even the Governmor of the Bank of England does not see house prices being significantly higher than they are now in 5 years time.
Secondly, the lenders, banks and mortgage companies are reducing the number of mortgages they are selling and making them more expensive. This will hit everyone, not just first time buyer. People looking to remortgage will be hit as they will find there are no low cost deals anymore.
The Fed and BofE keep lowering interest rates to try and keep the housing bubble afloat however the lending banks have already lost too much money in the US housing collapse and they are pushing the cost of borrowing up to their customers to recoup their losses.
People will stop spending as paying the morgage and bills takes up more and more of their take home pay. Ultility bills, food costs and fuel costs are all steadily rising.
We're in trouble, no doubt about it.
suok3 says:
2 years ago
It all sounds terribly scary. Do you think that the numbers of potential home buyers will drop this year?
And will people really be affected by the credit crunch that is being predicted?
Look forward to your comments
suok3