The pound's steep slide has propelled expectations the UK's key interest rate will more than double by next year, and that's setting up some homebuyers to face potentially unaffordable payments for refinanced mortgages.
If mortgage rates go up to 6%, the average household will have to pay more for their mortgage in the first half of the next decade. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said many will not be able to afford it.
Monthly payments could go up to $1,593 from $923.
Money.co.uk says a 2-year fixed rate mortgage is the shortest-term available in the UK.
The British pound fell to a record low against the dollar on Monday as investors worried that the UK's mini-budget would increase inflation. The yield on the UK bonds was multiyear highs.
The benchmark 10-year yield was above 4% for the first time since 2010 and the 2-year gilt yield was above 4.5%. The 5-year bonds of the UK are riskier than those of the most indebted countries.
After Bank of England Governor Andrew Bailey said Monday it was watching repricing in financial markets but didn't announce emergency action to aid the pound's value, the pound began to swing down again. Since December, the UK's central bank has raised the benchmark interest rate seven times.
The monetary policy committee can either defend sterling and risk a banking crisis, or accept that inflation will remain above target as far as the eye can see." There are no good options, but the latter is less damaging.
The central bank will meet on November 3. Inflation was 9.9% in August, slightly easing from 10.1% in July, according to the office for national statistics.
All Rights Reserved © 2024
