Source: CNBC —
LONDON — There are growing fears of a housing market crash in the U.K., after a swathe of tax cuts announced by the government sent interest rate expectations soaring, driving up lending rates for homebuyers.
Finance Minister Kwasi Kwarteng’s so-called mini-budget on Sept. 23 spooked markets with £45 billion ($50.5 billion) of debt-funded tax cuts, triggering a massive spike in government bond yields. These are used by mortgage providers to price fixed-rate mortgages.
The Bank of England responded to the market mayhem with a temporary purchase program of long-dated bonds, which brought some fragile stability to the market. However, Oxford Economics Chief U.K. Economist Andrew Goodwin suggested that there could be more pain ahead — particularly when it comes to the housing market.
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