The Bank of England is warning mortgage holders that the increasing volatility caused by the Eurozone debt crisis will mean higher mortgage rates. The cost of lending is rising for banks and they are set to pass the cost along to 11.2 million mortgagees across the United Kingdom (UK). UK homeowners are subject to variable-rate mortgages once their initial fixed rates expire, and many of them are expected to not be able to meet their new loan requirements once the banks hike rates. Some banks are trying to soften the impact by offering deals and incentives, but homeowners and prospective buyers are advised to start saving now for what lies ahead. For more on this continue reading the following article from Property Wire.
Millions of home owners in the UK are facing sharp rises in mortgage rates as a result of the chaos in the Eurozone, according to the Bank of England.
The monetary crisis in the Eurozone is driving up the cost of borrowing for high street banks in the UK and they are set to pass it on to the 11.2million mortgage holders in the country.
The banks will pass on the cost so that they can restore their profit margins by raising rates. The Bank of England said average rates on new tracker mortgages had already risen by 0.5% in the eight months to April.
It means that many home owners will have to find thousands of pounds extra a year and some will be pushed over the edge as they are already struggling to find the money to make their monthly repayments.
‘In the absence of falls in funding costs, it suggests that some further increase in mortgage rates is likely as banks seek to restore their margins,’ said the Bank of England in its latest inflation report.
Some of the biggest mortgage lenders, such as Halifax, the Co-op and Yorkshire Bank, have already hit their customers with an increase in their standard variable rate loans, the type of loan which home owners are automatically moved on to when their current deal, such as a two year fixed loan or a three year tracker, comes to an end.
According to the latest figures from the Council of Mortgage Lenders up to eight million home owners are thought to be on a variable rate. This includes those on tracker deals as well as those on the SVR. However, many of those on fixed rates will have to remortgage in the coming months as their deal expires.
Higher rates are being introduced on a weekly basis. Last week the Yorkshire Building Society raised its two year fixed rate loan from 3.24% to 3.54%. This week ING Direct is expected to raise its two year fixed from 3.29% to 3.49%.
Although a number are trying to compensate for the blow by offering incentives such as reduced arrangement fees or no fees for first time buyers. Experts advise new buyers and existing owners to shop around for the best deal.
This article was republished with permission from Property Wire.