Why experts fear for the housing market during economic chaos 🔴 The government has, once again, turned the housing market into a public casino where those who have the least and borrow the most are greatly exposed ✍️ Victoria_Spratt
Some leading mortgage lenders have withdrawn new mortgages from the market following forecasts of sharp rises in interest rates in the wake of a fall in the value of the pound.
The pound has dropped to its lowest point since 1985, leading economists and investors are warning that the Bank of England might have to introduce emergency interest rises to prop it up and leading mortgage lenders have withdrawn new mortgages from the market because this volatility has caused British bond prices to collapse pushing yields up which means mortgage loans now need to be repriced at higher rates as it will cost more for banks to lend money.
It now looks as though interest rates could go above 6 per cent in early 2023. Last week, this seemed like a far-fetched warning. If they do,from housing market expert Neal Hudson shows that the number of households due to re-fix their mortgages will peak at the very moment when, if market curves are to be believed, this happens.
“It might not be quite as bad as some of the financial metrics are suggesting today,” he added. “But even so this is going to have a lasting impact on the economy and the housing market.” The key pinch point is this: 6 per cent mortgage rates may not sound as high as the 16 per cent plus highs of the 1980s but house prices have hit historic highs since the pandemic which means that people borrow more now.
This lack of scrutiny is, combined with the unorthodox content of Kwarteng’s mini-budget, has spooked global markets. However, even without the OBR’s input, they will know that this tax cut experiment could cause problems for people with mortgages which could, potentially, alter the entire course of their financial lives.
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