Despite increasing mortgage rates and economic pressures in the UK, a predicted housing market crash hasn’t occurred. The UK’s mortgage market is experiencing a significant squeeze due to increased interest rates and inflation; however, these pressures haven’t resulted in an expected fall in house prices or a spike in repossessions.
Key Points:
- UK mortgage rates are climbing, with fixed rates commonly starting at 6%, and long-term government borrowing rates at 15-year highs. Despite this, the housing market hasn’t experienced the expected crash.
- Mortgage banks are taking measures to avoid repossessions by extending mortgage terms, offering payment holidays, and switching suitable customers to interest-only deals, among other strategies.
- Many homeowners are still benefiting from the lockdown-induced savings and historically low-interest rates, which buffer the housing market against the pressures of increasing mortgage rates.
- Despite the squeeze from rising mortgage rates, banks’ models suggest that millions of middle-class households can afford the increased rates, albeit with significant adjustments to spending habits.
- The Bank of England and economists are divided on whether interest rates might need to rise as high as 7% to rein in inflation, while others call for caution to avoid “monetary austerity”.
Source: https://www.bbc.com/news/business-66133116?utm_source=pocket_discover_personal-finance
