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More ‘mortgage misery’ looms with interest rates set to rise again

18 Jun 2023 3 minute read
Houses for Sale in Cardiff. Photo via Google

The squeeze on mortgage holders is set to tighten as the Bank of England gets ready to hike interest rates for the 13th time in a row, experts have said.

Some analysts are expecting interest rates to rise by another 0.25 percentage points on Thursday, and say there could be more hikes on the horizon.

It would take the rate to 4.75%, helping to drive the cost of borrowing and hitting more than a million mortgage holders whose fixed-rate deals are due to expire soon.

And a 0.5 percentage point increase is “not out of the question”, economists at Oxford Economics said.

It comes as the UK Government is under pressure to fulfil its pledge to halve inflation by the end of the year, to 5.4%. Consumer Prices Index (CPI) inflation eased back far less than expected in April, hitting 8.7%.

But the Bank of England is “caught between a rock and a hard place, as it has to choose between pushing more mortgage borrowers towards the brink and letting inflation run riot”, said Laith Khalaf, head of investment analysis at AJ Bell.

A period of volatility in the mortgage market has seen some major lenders temporarily pausing mortgage applications and increasing their rates in recent days.

HSBC UK briefly took some mortgage products available through brokers off the market last week as it faced high demand from homeowners. It is set to raise mortgage rates for the second time this week.

Santander also temporarily paused some mortgage applications earlier in the week in light of “changing market conditions”.

Around 1.3 million households are expected to reach the end of their fixed-rate term from April to the end of the year, the Bank of England said last month.

The average mortgage holder is looking at a £200 increase in their monthly repayments if their rate goes up by three percentage points.


Myron Jobson, senior personal finance analyst for Interactive Investor, said more “mortgage misery looms” for borrowers set to renew their deal in the second half of this year, “the majority of which were set at interest rates below 2%”.

But the Bank of England has said it will continue to raise interest rates so long as it sees signs of inflationary pressure.

Economists have pointed out that important indicators of persistent inflation, namely price increases in the service sector and wage growth, have remained elevated, which is likely to worry Monetary Policy Committee (MPC) policymakers.

“The scale of the market reaction indicates a lack of confidence that the Bank has done enough so far to bring inflation under control,” Andrew Goodwin, chief UK economist for Oxford Economics said.

“It also implies that the MPC will be willing to act further.”

Financial markets are now predicting there to be four further rate hikes, taking it to a peak of 5.75%, analysts said.

“A few hawkish comments from the Bank of England, or some more ugly inflation data, could easily tip those expectations up to 6%,” Mr Khalaf said.

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Mab Meirion
Mab Meirion
10 months ago

Hunt, he sure knows how to bring a country to its knees, the blame game Mr Hunt, are you ready to play it, you and Osborne, a special place in hell reserved just for you two…

Curse tablet anyone ?

Last edited 10 months ago by Mab Meirion
10 months ago
Reply to  Mab Meirion

You have overlooked the frightening effect of a witch called Truss. Not on our radar for long but boy didn’t she cause some damage. For a lightweight she had some long term wrecking ball capability. The real long term faults may lie in global financial institutions and their machinations but the bomb that she set off last autumn served to topple a fragile balance that was already vulnerable due to the energy and fuel price hoax. Mad bad bitch up there with the worst of them.

Peter Cuthbert
Peter Cuthbert
10 months ago
Reply to  hdavies15

One wonders when the BofE will actually get down to looking at whatever it is that is causing UK inflation. We know it is not excess demand in the economy as wages have lagged behind inflation for years and ‘ordinary’ people don’t have much spare cash to splash. Why are they not looking at the companies that have pushed up their profit margins under cover of inflation (Guardian 24 Mar 2023), and what about landlords who have done the same (Guardian 23 April 2023) and then, of course, there is BoardRoom Greed (Many articles – eg. Investors Chronicle)? Then, of… Read more »

10 months ago
Reply to  Peter Cuthbert

I think you have covered all the points that have irritated me for years. The never ending crises since March 2020 in particular have enabled greedy corporates to cream increased profits almost effortlessly. They pay their top cats very well but work every trick in the book to deny decent wages and conditions for the rank and file. Middle managers are also exploited but too many of them are wedded to the corporate myths about career progression and success to see what’s really happening. A detailed analysis of the real root causes would be an eye opener, for those who… Read more »

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