Scale of ‘mortgage time bomb’ revealed as mortgage holders paid rates of just 2.82% in May
The scale of the ‘time bomb’ set to detonate on the property market became clear today, as new data showed an alarming difference between interest rates currently being paid by mortgage holders and those that will be paid when fixed deals expire.
Statistics from the Bank of England show the average rate on outstanding mortgages grew to 2.82% in May. But that was still nowhere near the typical rates for a new deal.
Latest data from financial analysts Moneyfacts showed the average rate on a two-year fixed loan rising from 6.3% to 6.37%. The average fixed rate on a five-year deal was up from 5.91% to 5.94%.
With more than 100,000 fixed-rate loans in London due to expire by the end of the year, homeowners will have no choice but to pay more in interest.
Mortgage costs have risen dramatically over recent weeks to levels not seen since the disastrous mini-Budget last Autumn following disappointing inflation figures.
Today Nationwide raised all its fixed rates by up to 0.35%. It follows similar moves yesterday by the biggest mortgage lender Halifax and other major players such as TSB, HSBC and First Direct yesterday.
Oli Sherlock, director of insurance at Goodlord, said: “We’ve now seen six consecutive months of price rises and we predict this to continue throughout the summer. The fairly sizable drop in void periods during June also reflects this intensification of demand, as tenants snap up properties as soon as they come on the market.
“We’ll likely see prices and demand peaking as we hit the start of the academic year and, whilst things normally begin to cool down over the autumn and winter, if supply issues continue we could see this pressure on rental stock continue, affecting all industry stakeholders.”
Despite the chaos, the Bank’s data showed the number of mortgage approvals continued to rise in May, to 50,500.
Emma Cox, managing director of Real Estate at Shawbrook, said: “Buyer confidence has remained robust despite the challenges facing the property market.”
