Consumer champion Martin Lewis has said that a mortgage ticking time bomb that he previously warned about is now exploding.
The MoneySavingExpert.com founder told ITV’s Good Morning Britain that he had previously highlighted a “mortgage ticking time bomb”.
He continued:
“And I’m afraid that time bomb is now exploding.”
Lewis was speaking around the time that Moneyfacts reported that the average two-year fixed-rate mortgage now cost 6.07%, the highest since November, and as Bloomberg warned that high interest rates could cause a recession.
Mr Lewis said that if interest rates are going to be high over three or four years, people are going to have to readjust their finances.
He said he could not see a mortgage rescue package being brought in, as the whole point of higher interest rates is to leave people with less disposable income.
Lewis also criticised the UK banks for not making it easier for struggling borrowers to take payment holidays, temporarily reduce the amount they pay in, or to switch to interest-only loans.
Lewis said he gave his views during a mortgage summit held by Chancellor Jeremy Hunt last year, explaining today:
“And what I was suggesting in that meeting is, first of all those things need to be made reversible, so you know that if you can do it temporarily you can go back without a problem. That isn’t the situation.
“And second, they need to look at minimising the impact on people’s credit scores, because that puts people off taking a form of action, it scares them that they’re going to be disenfranchising themselves from other forms of borrowing for six years, but again, that hasn’t happened.
“So the ultimate result of that mortgage summit was a tiny bit more communication to borrowers.”
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Over in parliament, Treasury ministers are taking questions from MPs – at a time when the cost of living crisis has soared up the political agenda.
Ian Byrne, Labour MP for Liverpool, West Derby, asks what fiscal steps the chancellor plans to take to help reduce the impact of recent increases in the cost of living on households.
Chancellor Jeremy Hunt says the government knows the pain that households up and down the country are going through.
It has introduced “one of the largest support packages in Europe”, Hunt adds, worth £3,300 per household this year and last year.
Byrne points out that Which? has shown that own-brand supermarket food brand prices have risen by 26.6%. We now have security locks on baby formula milk, at a time when corporations are making vast profits, he says.
Byrne reminds the Commons that the government have signed up to UN goals of eradicating poverty. So..
Q: Will he cap essential food prices and tackle the grotescue profiteering in the food industry that is driving many of my constituents in Liverpool, West Derby into poverty?
Hunt says he totally respects Byrne for raising these concerns, but doesn’t support such price caps.
The chancellor says:
I don’t believe capping prices is the right long-term solution.
Hunt insists that “we are doing a lot”, citing payments of £900 per household for people on means-tested benefits, £150 for households with a disabled member, and £300 for thosewith pensioners.
This, Hunt adds, is:
Precisely because we want to help the people he is talking about.
Hunt adds that he will meet with regulators next week to discuss what else can be done with respect to supermarkets…
Rising interest rates can be profitable for savers, with NS&I raising the rates on its Premium Bonds today, and its savings package for young people.
ThePremium Bonds prize fund rate has been increased to 3.70%, its highest rate in 15 years, and the Junior ISA interest rate increased to 3.65%.
Myron Jobson, senior personal finance analyst at interactive investor, says other savings rates have also been rising, creating more competition….
“NS&I has once again sweetened its popular flagship product in a bid to meet a lofty target set by the government to attract £7.5bn from savers in the current tax year, which is 25% more than the £6bn target for the previous year.
It is a tall order for the government-sponsored bank facing stiff competition from other savings providers.
Easy access savings rates have hit 4% for the first time since 2009, and market-leading one, two, three and five-year fixed bonds all offer 5.30% or more according to Moneyfacts.
Consumer champion Martin Lewis has said that a mortgage ticking time bomb that he previously warned about is now exploding.
The MoneySavingExpert.com founder told ITV’s Good Morning Britain that he had previously highlighted a “mortgage ticking time bomb”.
He continued:
“And I’m afraid that time bomb is now exploding.”
Lewis was speaking around the time that Moneyfacts reported that the average two-year fixed-rate mortgage now cost 6.07%, the highest since November, and as Bloomberg warned that high interest rates could cause a recession.
Mr Lewis said that if interest rates are going to be high over three or four years, people are going to have to readjust their finances.
He said he could not see a mortgage rescue package being brought in, as the whole point of higher interest rates is to leave people with less disposable income.
Lewis also criticised the UK banks for not making it easier for struggling borrowers to take payment holidays, temporarily reduce the amount they pay in, or to switch to interest-only loans.
Lewis said he gave his views during a mortgage summit held by Chancellor Jeremy Hunt last year, explaining today:
“And what I was suggesting in that meeting is, first of all those things need to be made reversible, so you know that if you can do it temporarily you can go back without a problem. That isn’t the situation.
“And second, they need to look at minimising the impact on people’s credit scores, because that puts people off taking a form of action, it scares them that they’re going to be disenfranchising themselves from other forms of borrowing for six years, but again, that hasn’t happened.
“So the ultimate result of that mortgage summit was a tiny bit more communication to borrowers.”
Investors have been racing to add to bets on higher UK interest rates over the past few weeks, almost fully pricing in a surge to the highest level in two decades.
Bloomberg explains:
Markets now are betting rates rise at least a quarter point on Thursday, to 5% by August and almost 6% by February.
Rates at that level would send mortgage rates further into territory the BOE has identified as painful for households, with more than 1 million required to refinance loans at significantly costs this year.
Not every analyst believes UK interest rates will rise as high as 6%.
Mohit Kumar of investment bank Jefferies predicts rates will peak at 5%, half a percentage point higher than today.
Kumar explains:
Our view is driven by the impact of BoE hikes on the mortgage market and the housing sector, which would constrain the BoE.
The view is also driven by the fact that we believe that monetary policy on its own would be ineffective in controlling inflation, unless accompanied by support from the fiscal policy.
BoE hikes will have limited impact on inflation, hence in our view, there is a need of fiscal support.
The cost of fixed-rate mortgages may continue to rise, unti the markets see signs that UK inflation is falling steadily.
Nicholas Mendes, mortgage technical manager at broker John Charcol, explains:
My worry is that things may well get worse before they get better, while we expect inflation figures [on Wednesday] to come down the anticipation will be they in line with market forecasts. If not, markets will be pricing in higher base rates over a longer period of time.
We also have the MPC meeting on Thursday which will also play a part in market reaction following the governors’ comments.
Markets need stability and a positive outlook for the future, once we have this in our sights this is when we will see swaps reduce and start to see fixed rate pricing come down.
Homeowners need to understand that sub 2% rates aren’t the norm and should not be used as a benchmark of where rates will return to in the future. A mortgage is a long-term commitment which ultimately means you must take the rough with the smooth.
Despite the cost of living crisis, demand for cruises for the older-50s is holding up well.
Saga has reported that its load factor (which measures how full its cruise ships are) is already 79% for the current financial year, up from 72% at this time last year.
Underlying profits is expected to be well ahead of the prior year, with Saga’s River Cruise and Travel businesses on track to return to profitability.
Euan Sutherland, Saga’s CEO, says:
“Four months into the financial year, we have continued to build on the momentum in our Cruise and Travel operations, while making further progress in our growth agenda through the development of our newer businesses. Year-end underlying profit is expected to be well ahead of the prior year.
“We have taken strong bookings for our ocean cruises with a load factor that is ahead of the same point in the prior year, and our River Cruise and Travel businesses are on track to return to profitability in line with previous guidance.
Buy-to-let mortgage rates have also risen again.
Moneyfacts reports:
The average 2-year buy-to-let residential mortgage rate today is 6.40%. This is up from an average rate of 6.30% on the previous working day.
The average 5-year buy-to-let residential mortgage rate today is 6.29%. This is up from an average rate of 6.23% on the previous working day.
There are currently 2,525 buy-to-let mortgage products available. This is up from a total of 2,515 on the previous working day.
Average two-year fixed mortgage rates in Britain have jumped to their highest since late November, as the turmoil in the mortgage market continues.
Data provider Moneyfacts report that the average two-year fixed mortgage rate has risen to 6.07% this morning, up from 6.01% yesterday.
At the start of May the average was 5.26%, but it has been rising steadily higher as financial markets have anticipated further rises in UK interest rates – possibly to 6%.
The average cost of five-year fixed-rate mortgages increased to 5.72% from 5.67%, which is the highest since early December.
There are also fewer mortgages on the market, too. Moneyfacts reports there are 4,641 residential mortgage products available today, down from 4,683 on Monday.
Investors are still repricing their expectations for the Bank of England base rate, after the very strong employment data last week [showing faster wage growth], reports Jim Reid of Deutsche Bank.
Reid says:
One particular milestone from yesterday was that for the first time since the mini-budget turmoil, overnight index swaps were pricing in a 6% [Bank of England] base rate as more likely than not by the close, and not just on an intraday basis.
This positioning comes ahead of a pivotal few days for UK macro, since we’ll get the May CPI [inflation] release first thing tomorrow, and then the Bank of England’s latest policy decision on Thursday, where another 25bp hike is widely expected.
The UK economy could fall into recession if the Bank of England lifts interest rates as high as some investors expect.
New analysis from Bloomberg Economics show that Britain could tip into a shallow recession if the Bank of England pushes its benchmark lending rate to 6%
Currently, the money markets indicates there’s a slightly greater than evens chance that BoE base rate hits 6% by February 2024, up from 4.5% at present (with a rise to 4.665% expected on Thursday).
Bloomberg has calculated that, if rates hit 6%, GDP would shrink by 1.4% in 2024.
“Our own view is that the pricing is probably overdone,” Dan Hanson, an economist at BE, wrote in a note published Tuesday.
Hanson adds:
“But if this tightening cycle has taught us anything, it’s not to underestimate the persistence of inflation.
The BOE may judge a significant slump is what’s needed to prevent the inflation psychology in the UK from becoming embedded.”
Because more people are on fixed-rate mortgages than a few decades ago, it will take longer for previous increases in interest rates to impact households
Hanson writes:
“With that in mind, we think there’s a significant risk of a downturn later this year — even on our relatively dovish policy view. If rates were to climb to 6% the slump would be even deeper.
https://news.google.com/rss/articles/CBMihQFodHRwczovL3d3dy50aGVndWFyZGlhbi5jb20vYnVzaW5lc3MvbGl2ZS8yMDIzL2p1bi8yMC91ay1yZW50LXNoYXJlLW9mLXBheS1mb29kLWluZmxhdGlvbi1jb3N0LW9mLWxpdmluZy1tb3J0Z2FnZS1yYXRlcy1idXNpbmVzcy1saXZl0gGFAWh0dHBzOi8vYW1wLnRoZWd1YXJkaWFuLmNvbS9idXNpbmVzcy9saXZlLzIwMjMvanVuLzIwL3VrLXJlbnQtc2hhcmUtb2YtcGF5LWZvb2QtaW5mbGF0aW9uLWNvc3Qtb2YtbGl2aW5nLW1vcnRnYWdlLXJhdGVzLWJ1c2luZXNzLWxpdmU?oc=5
2023-06-20 08:14:37Z
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