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Highlights
- Homeowners are facing the biggest hike in mortgage interest rates since the 2008 global financial crisis, as per OBR.
- BoE is expected to raise the interest rate from the historic low of 0.1% to 1% by the end of 2022.
- Homeowners need to prepare for a 6% increase in costs next year.
The Autumn budget has got some tough news for the homeowners. According to the data released by the UK government’s independent forecasting unit, homeowners are facing very high mortgage rates amid rising inflation. OBR’s report was quoted in the recent budget stating that this was the biggest hike in mortgage interest payments since the 2008 global financial crisis. In 2023, a 13% hike is expected in the interest they pay.
According to investment firm AJ Bell, an additional amount of over £1,000 would have to be paid by some buyers with larger mortgages. Meanwhile, the Liberal Democrats concluded from the data that an increase of £510 a year, or £42 a month in the payments would have to be given by householders with average mortgage of £211,000.
What are the challenges for home buyers after Autumn Budget?
Interest rates are currently at a historic low of 0.1% but BoE is planning to increase the base rate to 0.25% next week. A 0.25% hike is expected in December, and with two more such hikes, the rate is expected to settle at 1% by the end of 2022. Ahead of the interest rate hike expected by the Bank of England to curb the rising inflation, banks are putting their cheap mortgage deals off the table, leading to increasing costs for home buyers.
If the interest rates rise, the annual cost of mortgages will rise by around £14 billion, which will further add to the economic slowdown due to the current supply chain disruptions.
RELATED READ: Which UK lenders are offering best mortgage rates?
Banks are already in action behind closed doors after being signalled by BoE’s stand to counter inflation by raising interest rates. However, as lenders prepare to raise mortgage rates, families are preparing themselves to face rising inflation, lower take-home income ahead of a rough winter this year. According to the OBR report, homeowners need to prepare themselves for a 5.6% increase in costs next year, further increasing to 13% in 2023 prior to going down to 5.4% in 2024.
Source: Copyright © 2021 Kalkine Media
Let’s take a look at some of the mortgage lenders offering best rates to owners.
First Direct
Headquartered in Leeds, England, First Direct is a UK-based retail bank division of HSBC Bank plc (LON: HSBA). It offers a range of services other than loans and mortgages. Its mortgages come in all shapes and sizes, and it is offering one of the cheapest mortgage deals in the market at present.
Nationwide Building Society (LON: NBS)
The largest building society in the world, Nationwide Building Society has given a return of 15.29% in 1 year. Its current market cap stands at £2,005.55 million. The shares of Nationwide Building Society were trading at GBX 190.00 as of 28 October 2021.
RELATED READ: Autumn Budget 2021: Which lenders can benefit from £4-bn city tax cut?
Natwest Group PLC (LON: NWG)
Natwest Group PLC’s current market capitalisation stands at £26,388.35 million and it has given a return of 91.16% in 1 year. The shares of Natwest Group PLC were trading at GBX 231.40 as of 28 October 2021.
Barclays PLC (LON: BARC)
Barclays PLC’s current market capitalisation stands at £33,523.98 million and it has given a return of 94.56% in 1 year. The shares of Barclays PLC’s shares were trading at GBX 199.28 as of 28 October 2021.
Lloyds Banking Group PLC (LON: LLOY)
Lloyds Banking Group PLC’s market cap stands at £35,199.64 million, and it has given a return of 81.92% in 1 year. The shares of Lloyds Banking Group PLC were trading at GBX 49.58 as of 28 October 2021.
RELATED READ: Autumn Budget 2021: 6 ways it will impact your personal finance
