U.K. Mortgage Rates Hover Near 14-Year Highs As Sunak Takes Reins
Key U.K. mortgage rates remain close to peaks last seen in the 2008 financial crisis.
(Bloomberg) -- Key UK mortgage rates remain close to peaks last seen in the 2008 financial crisis as the nation braces for its third prime minister in seven weeks.
The average two-year fixed-rate home loan dipped slightly to 6.54% on Tuesday, a hint of stabilization after breaching 6.65% for the first time since August 2008 last week, according to Moneyfacts Group Plc. The average five-year fixed-rate deal also fell to 6.41%, but remains at a level not seen since November 2008.
The stubborn rise in mortgage costs, which is sharply slowing demand in the property market, is one of the headaches Rishi Sunak will inherit upon replacing Liz Truss as UK prime minister on Tuesday. Borrowers looking to buy or refinance property will face extra strain on top of inflation that’s been running at a 40-year high.
UK government bonds have provided a real-time verdict on policy in recent weeks, having spiked after Truss’s now-abandoned economic plan on Sept. 23. The yield on 30-year gilts has dropped back to levels seen before the mini-budget, offering Sunak’s administration a little breathing space and easing the cost of loan funding for banks -- though the effects will take several days to filter through into their mortgage prices.
“Falling borrowing costs will support demand and transaction volumes in the UK housing market, but this should be seen in context,” said Tom Bill, head of UK residential research at broker Knight Frank. “A 12-year period of ultra-low borrowing costs is over.”
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