Homeowners are being warned that mortgage rates may reach 7 per cent by the end of 2008 as the effects of the credit crunch continue to impact on economies worldwide. That figure would be the highest for a decade and isn’t helped by predictions that the Bank of England will increase rates this year to cope with inflationary pressures.
The main cause of the raise is the sharp increase in rates on the swap market which is the source of much of banks and building societies’ finance when they are trying to raise funds for customers’ mortgages . The last ten days has seen swap rates rise by 0.5 per cent from 5.8 per cent to 6.3 per cent, though economists are predicting the increase won’t stop there. In what is a heavily interconnected market, it is the forecasts of an increase of interest rates by the Bank of England that has caused the rates on the swap market to rise.
The increase will affect all homeowners, particularly those trying to get on the property ladder for the first time. However, it will also pose difficulties for people hoping to move home and for the estimated 1.4 million people whose mortgages are set to be re-financed before the end of the year.
Home Loan Repayments Set to Rise Again
Thu, 12 Jun 2008
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