Interest rates for mortgages have reached a 15-year high
In the face of rising mortgage rates, executives from banks and building societies have been grilled by the treasury committee since 10:15 BST. The escalating rates, which have been on the increase for weeks, have now surpassed the peak seen in October 2022.
According to the new mortgage charter, mortgage lenders are prevented from evicting homeowners less than a year after their first missed payment. This charter, agreed with the chancellor, brings 'clarity' and 'consistency' for consumers, as stated by Andrew Assam, homes director for Lloyds.
The Bank of England has been actively increasing interest rates in an attempt to prevent the UK from slipping into another recession. The most recent increase, the 13th in a row, has undoubtedly contributed to the spike in mortgage rates.
Moneyfacts, a UK financial industry data provider, recently reported that mortgage rates have reached 6.66%, a level not seen since August 2008. Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority, urged homeowners who are struggling with their mortgage or believe they might have difficulties to speak to their lender.
If homeowners are worried about making their payments, they should contact their lender as soon as possible, as lenders have a range of options to help, according to Mills. He added that if homeowners can keep up with their mortgage payments, they should do so, as changing the contract could lead to higher payments in the future.
The mortgage charter also allows struggling borrowers to switch to interest-only payments for six months and extend their mortgage term to reduce monthly payments. This charter, however, does not repeat earlier facts about mortgage rates spiking, the Bank of England increasing interest rates, or UK banks continuously increasing mortgage rates.
UK banks such as Lloyds, Santander, and Nationwide have had to continually increase mortgage rates due to the rising interest rates. During the hearing, bank representatives were also asked to explain the support they will be offering to customers during this financially difficult time.
The spike in mortgage rates is attributed to the aftermath of the mini-budget delivered by Kwasi Kwarteng last September. Rachel Reeves, the new Chancellor of the Exchequer in the British government, has been tasked with steering the economy through these challenging times.
