Interest rates on mortgages reach a 15-year peak
In the aftermath of the mini-budget delivered by Kwasi Kwarteng in September 2022, the average mortgage rate has been climbing steadily for weeks, reaching levels not seen since August 2008. According to Moneyfacts, a UK financial industry data provider, the current average mortgage rate stands at 6.66%.
This spike in mortgage rates has resulted in customers taking out new loan deals facing higher payments above £200 per month. Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority (FCA), is urging homeowners who are struggling with their mortgage or believe they might have difficulties to speak to their lender.
Andrew Assam, homes director for Lloyds, stated that the new mortgage charter agreed with the chancellor brings 'clarity' and 'consistency' for consumers. The charter allows struggling borrowers to switch to interest-only payments for six months, and also allows borrowers to extend their mortgage term to reduce monthly payments.
The Bank of England has been increasing interest rates in an attempt to prevent the UK from entering another recession, with the most recent increase being the 13th in a row. This move has forced UK banks such as Lloyds, Santander, and Nationwide to continuously increase mortgage rates.
Regulation cannot stop mortgage rates from rising, but the measures put in place by the FCA over the past decade will ensure people get the support they need, when they need it. Mr. Mills also states that if homeowners are worried about making their payments, they should contact their lender as soon as possible as they have a range of options to help.
If homeowners can keep up with their mortgage payments, they should, as changing their contract could lead to higher payments down the line. Bank and building society bosses have been in a hearing with the treasury committee since 10:15 BST to discuss the impact of the high mortgage rates and the support they will be offering to customers during this difficult financial time. The institution that controlled the Bank of England in connection with the increase in mortgage interest rates and advocated for the establishment of payment support for customers facing financial difficulties was the Bank of England itself, acting as the central bank setting interest rates and monitoring economic conditions including consumer price inflation and unemployment. No separate external institution controlling these actions is mentioned in the search results.
In conclusion, the current high mortgage rates are a result of the Bank of England's efforts to prevent a recession, which has forced UK banks to increase their mortgage rates. Homeowners who are struggling with their mortgage payments are encouraged to speak to their lender for support. The FCA's measures will ensure that homeowners get the support they need during this difficult financial time.
