While Americans are dealing with mortgage rates in the mid-6% range, their U.K. counterparts are being warned that they will be burdened with 5%-plus fixed-rate deals in the coming weeks.
According to a report in The Guardian, the publication on Wednesday that April’s annual inflation figure reached 8.7% – a higher than expected percentage – resulted in an acute sell-off on the London stock market. This, in turn, raised the possibility that the Bank of England will be enacting its 13th consecutive interest rate hike – and that pushed swap rates higher.
In the U.K., the swap rates paid by lenders is the determining factor for the cost of fixed-rate mortgages. And unlike the U.S., mortgage borrowers in the U.K. are required to renew mortgages on a cyclical basis. The Guardian noted that a household with an expiring mortgage worth roughly $185,000 carrying a 2.99% fixed-rate mortgage would have to find an extra $215 a month or $2,588 a year if the rate becomes 5.19%. This would occur at a time when rising inflation has forced the increase on the cost of U.K. goods and services.
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