How sterling crisis is impacting those looking for a mortgage

Sir Keir Starmer has declared it a “Labour moment” – telling his party it’s time for them to end twelve years of Conservative rule.

Across the country mortgage deals on offer yesterday have been withdrawn today when the officer back on the table you’ll be paying more for some close to double the previous fixed rate in all some 18 companies have withdrawn mortgage deals and the list is being added to all the time we’re paying just over a thousand pounds at the moment on our mortgage and it’s

Looking like it’s going to go up by 400 at least but every time we look every time we check it looks like it’s going up even more eve ainsworth from crawley is coming out of a fixed term mortgage and isn’t sure where she’ll find the money to pay for a new one it’s really worrying it’s scary and it’s scary because there’s no reassurance it just feels like everything’s

Escalating and there’s absolutely no control out there quasi quateng told city investors this morning he was now in daily contact with the governor of the bank of england and all eyes in the city were hanging on a juddering live stream at lunchtime the bank of england chief economist tried to reassure markets there would be a bigger than usual interest rate rise

November i think it’s hard not to draw the conclusion that all this will require a significant monetary policy response let me leave it there hupel welcomed the government clarifying it still believed in independent audit of its work implying that wasn’t at all clear last week well i still think the overall strategy is absolutely right so i’ve sort of firm believer

Of trust economics julian jessup is one of the economists close to liz truss and quasiquarting he thinks they overloaded last week’s mini budget i think there are a couple of missteps on friday and over the weekend uh one was the decision to pre-announce the cuts in income tax both the the basic rate and the higher rate from next year i think that that could have

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Waited until the next fiscal event which we now know is going to be in november and the second was the the chancellor confirming over the weekend that he’s planning more tax cuts to come we sounded like he’s turning a deaf ear to the concerns in the markets at the labor party conference in liverpool secure stamas said recent days proved the tories had lost the

Mantle of economic competence what we’ve seen in the past few days has no precedent the government has lost control of the british economy and for what they’ve crashed the pound and for what higher interest rates higher inflation higher borrowing and for what not for you not for working people for tax cuts for the richest one percent in our society don’t forget

Don’t forgive the only way to stop this is with a labor government they used to lecture us about fixing the roof when the sun was shining but take a look around britain they haven’t just failed to fix the roof they’ve ripped out the foundations smashed through the windows and now they’ve blown the doors off for good measure the markets rejected carsonomics prime

Minister the prime minister was spotted putting in some preparations for her own party conference near parliament but her opening economic gambit has created a situation where while the german government can borrow for five years at an interest rate of two percent greece and italy can borrowed about four percent they’re all less than the uk government borrowing at

Nearly four and a half percent it might not look very different but it adds billions to the government’s bills the pound ended up roughly where it started the day but currency markets think it has many rocky days ahead investors are still highly worried about what this government is going to do with with borrowing and with it with the outlook for debt and you think

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We’ll see more of that because markets just aren’t convinced the government’s numbers add up i think that’s exactly right you know investors are not convinced but in recent days the focus has shifted to the price of borrowing the market’s predictions of where they think interest rates will end up already feeding into the mortgage market and real lives well as we’ve

Been hearing the economic crisis is already hitting home for those looking to secure a mortgage in the days since the government’s mini budget hundreds of products have vanished from the market as lenders prepare for a volatile future of higher interest rates our economics reported neil mcdonald joins me now neil explain why mortgage products are disappearing well

The people who lend you the money for a mortgage have to raise those funds themselves and they do that from savers or from the financial markets now of course when they’re doing a fixed rate mortgage they’re lending you money at a fixed rate for a number of years so they’re very sensitive to the interest rate that they themselves might be paying now last friday the

Chancellor announced the biggest tax cuts in half a century and the financial markets judge that that will increase inflation and they think the bank of england will raise interest rates to bring that inflation under control so interest rate expectations have absolutely shot up hitting six percent next summer and in that situation mortgage lenders are withdrawing

Their own products while they think about whether they need to change their own rates so what will higher interest rates mean for those mortgage payments those monthly payments well there is a big shock coming for many people now about six and a half million households in the uk are on fixed rate deals so they’re insulated from current changes in interest rates

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But of course those deals will come to an end and when that happens they will face the full effect the city firm capital economics has looked at a household taking out a 186 000 pound mortgage for two years last autumn right now their interest rate will be 1.2 percent and they’ll be making monthly payments of 620 pounds on current trends when that deal ends next

September the interest rate could shoot up to 6.6 percent and they’d be paying about 1100 pounds a month that would mean that they would be paying about six thousand pounds a year extra now that’s a stark example but it does give you a sense of the enormous difference that this could make to some people so i mean that’s pretty terrifying but what is it going to do

To the economy briefly well this is another big squeeze on people’s incomes you know after energy food petrol this one could be even bigger and for some households it will simply wipe out the the gain from government tax cuts so that household i was just talking about where their mortgage payments could go up by six thousand pounds a year the amount they’d gain

From the cut and income tax from national insurance would be about 900 pounds a year i think the real danger here is that the government’s strategy is based on boosting economic growth by cutting taxes but that could be simply completely canceled out by more expensive mortgages neil thanks very much

Transcribed from video
How sterling crisis is impacting those looking for a mortgage By Channel 4 News