Mortgage rates are set to hit a 20-year high while house prices will dive almost 8%, experts say.
Rates have already topped 6% – the highest for 14 years – following Kwasi Kwarteng ’s bungled mini-Budget.
But the Centre for Economics and Business Research said new two-year fixed-rate deals would reach 7.4% between April and June next year.
That means anyone with a 25-year £200,000 mortgage would pay £3,912 a year more.
Before Mr Kwarteng’s disastrous “fiscal event” on September 23, the average rate was 4.7%.
Research from housing market website BuiltPlace suggests that rates in excess of 6% mean repayments on an average new mortgage will account for more than a quarter of household income – the highest burden on families since the recession of the early 1990s.
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Getty Images)The CEBR said significantly dearer borrowing would push down house prices. It predicted falls of around 3.9% in 2023 with a peak slump of 7.8% during the summer.
Data from financial experts Moneyfacts reveals the number of mortgages available has begun to rise following a big drop after the mini-Budget when lenders pulled deals because of uncertainty over interest rates.
As of yesterday there were 2,430 mortgages on the market. That compares with a low of 2,258 on October 1 but is still 1,500 fewer than before Mr Kwarteng’s intervention. Mortgage brokers say lenders are “playing safe” but believe costs could eventually start to dip.
Mr Kwarteng faced pressure yester-day to extend the mortgage guarantee scheme. It was introduced during the pandemic to keep 95% home loans available amid fears house prices might crash.
Under the scheme, the Government covers a portion of the lender’s losses if a borrower defaults.
The Chancellor had been expected to quiz bank chiefs on their plans to ease mortgage turmoil. Instead, they urged him to continue the scheme which was due to end in December.
