Data shows that borrowing costs are at their highest since August 2008, amid the global financial crisis.
According to Moneyfacts, a primary UK mortgage rate reached its highest level in 15 years this week, surpassing the rate set amid a September “mini-budget” crisis.
Tuesday’s average two-year fixed residential mortgage rate reached 6.66%, surpassing October’s 6.65%. British mortgage rates are at 6.94%, the highest since August 2008.
Mortgage rates have risen due to the Bank of England’s interest-rate rises to combat inflation, lowering demand for British homes.
Fixed mortgage agreement rates have increased in recent weeks due to concerns about stickier-than-expected consumer-price increases, which stood at 8.7% in May.
The rate hike is causing cash-strapped homeowners to worry about a housing market collapse.
“Undoubtedly, households and customers are feeling the effect of not just mortgage rates increasing but the wider cost-of-living crisis,” Lloyds Banking Group housing director Andrew Asaam told Reuters.
Research by the National Institute of Economic and Social Research found that higher mortgage repayments would cause 1.2 million British households, or 4% of the nation, to run out of savings by the end of the year.
“We suspect that higher mortgage rates will contribute to weaker economic activity in early-2024, and we are now not ruling out a technical recession in the first half of next year,” said Matthew Ryan, head of market strategy at global financial services business Ebury.
Financial markets expected UK interest rates to peak at 6.35% in the first quarter 2024.