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☆ UK could borrow a leaf from Canada’s mortgage book
▼ + stars: | 2023-07-07 | by ( Edward Chancellor | ) www.reuters.com time to read: +6 min

The amount of mortgage debt rose even more sharply. This would require lenders to fix total monthly payments – of both interest and principal – relative to the outstanding mortgage balance. When interest rates rise sharply, as is happening now, repayments might be less than the monthly interest bill. The amount of mortgage debt outstanding would then increase as unpaid interest is added to the principal – a situation known as “negative amortisation”. Since borrowers always hand over a proportion of their income, mortgage payments wouldn’t shrink when interest rates decline.

Persons: Irving Fisher, ”, “, Neal Hudson, Michael Gove, Patrick Macaskie, Victor Dodig, Edward Chancellor, Peter Thal Larsen, Oliver Taslic Organizations: Reuters, Bank of England, Office, National Statistics, Bank of, Fiscal Studies, Canadian Imperial Bank of Commerce, CIBC, Reuters Graphics, Thomson Locations: United Kingdom, ”, Britain, England, Bank of England, United States, Canada

☆ UK mortgage rates rise again, turning screw on homeowners and buyers
▼ + stars: | 2023-06-29 | by ( Andy Bruce | ) www.reuters.com time to read: +2 min

LONDON, June 29 (Reuters) - Major British lenders on Thursday announced another increase in mortgage rates offered via brokers, pushing many products above the 6% mark in painful news for many homeowners and potential buyers. Barclays (BARC.L), NatWest (NWG.L) and Virgin Money (VMUK.L) informed brokers that rates on many mortgage offerings will rise again on Friday, according to emails seen by Reuters. "As mortgage rates continue to rise, the property market is being pushed further towards a cliff edge and there's no real help in sight," mortgage broker Lewis Shaw of Shaw Financial Services said. Two-year swap rates - a key determinant of mortgage borrowing costs - have soared by 0.83 percentage points over the course of June. Mortgage rates of 6% represent the same financial burden from repayments as they did in the late 1980s, even though mortgage rates were around 13% then, according to housing market analyst Neal Hudson, founder of consultancy BuiltPlace.

Persons: Lewis Shaw, Andrew Goodwin, Liz Truss, Neal Hudson, Andy Bruce, William Schomberg, Sachin Ravikumar Organizations: Bank of England, Barclays, NatWest, Virgin, Reuters, Nationwide Building Society, Shaw Financial Services, Oxford, Oxford Economics, Thomson

The housing market has totemic importance in Britain's consumption-driven economy and is closely linked to consumer confidence. The average mortgage rate on new two-year mortgage deals rose on Wednesday to 5.90%, according to property data provider Moneyfacts - the highest since December last year, in the aftermath of the mini-budget. "It takes a far lower mortgage rate to create the same amount of financial stress in terms of repayments as a double-digit mortgage rate did back in previous periods," Hudson said. Reuters GraphicsSTRESSThe question now is how mortgage market stress will feed through into the real economy. Jamie Lennox, director at broker Dimora Mortgages, said there was "no end in sight" for the trouble in the mortgage market.

Persons: Hannah McKay, Liz Truss, We're, Neal Hudson, Hudson, Jamie Lennox, shivers, BoE, Philip Shaw, Lucy Raitano, Iain Withers, Kirsten Donovan Organizations: REUTERS, Bank of England, Investors, HSBC, Reuters, Financial, Thomson Locations: London, Britain, BoE's

Fueled by a post-lockdown buying frenzy, the average UK house price hit a record £275,000 ($315,474) in December, a £27,000 increase on the previous year’s high. UK mortgage rates have been ticking upwards since spring, in line with rising interest rates. UK house prices fell 0.9% between September and October, the first decline in 15 months, according to data from Nationwide. A drop in buying power makes a significant drop in house prices inevitable, according to Andrew Wishart, a senior economist at Capital Economics. When house prices fall, homeowners feel less confident about their personal finances, causing them to cut back on spending and hold off on making additional investments.

☆ Central banks get sucked into financial black hole
▼ + stars: | 2022-10-14 | by ( Edward Chancellor | ) www.reuters.com time to read: +7 min

Central bankers around the world want to bring inflation down by returning interest rates to “normal” levels. As a result, the average UK mortgage has grown to 3.4 times average income, up from 1.5 times in the early 1980s, according to housing analyst Neal Hudson. But it’s left many homeowners extremely vulnerable to higher interest rates. As a result, the government’s fiscal position is more exposed to interest rate fluctuations. As a financial black hole opens up, central banks will be forced to stop tightening.

☆ UK mortgage borrowers are in for a nasty shock from soaring rates
▼ + stars: | 2022-09-27 | by ( Anna Cooban | ) edition.cnn.com time to read: +4 min

London CNN Business —Millions of mortgage borrowers in the United Kingdom are bracing themselves for huge hikes to their monthly payments as a consequence of the run on the pound. Markets had already been expecting the central bank to raise interest rates to 4.75% by next spring. There are 9 million outstanding residential mortgages in the United Kingdom, according to UK Finance, an association of banks and financial services firms. About 20% of those loans are tracker, or variable rate products, that typically become more expensive when the central bank hikes rates. Halifax, owned by Lloyds Bank (LLDTF), removed some of its mortgage products, while Virgin Money stopped taking mortgage applications from new customers until later this week.

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