The number of mortgage defaults is expected to go up in the coming months, according to data released by the Bank of England on Thursday. At the same time, the number of new loans will continue to go down, as experts warn that the “golden age” of cheap deals is coming to an end.
The latest quarterly credit conditions survey from the UK central bank paints a bleak picture. The number of mortgage deals was already going down before the chancellor’s mini-budget on September 23.
Kwasi Kwarteng’s package of unfunded tax cuts caused chaos for homebuyers. Over the course of a few days, lenders pulled hundreds of fixed-rate deals, and when they came back with new deals, they were much more expensive.
Lenders surveyed by the Bank said that the amount of secured credit available to households, like mortgages, went down in the three months leading up to the end of August, and more drops are expected in the three months leading up to the end of November. The data, which was collected before the mini-budget, showed that both unsecured personal loans and credit card borrowing showed a similar picture.
There was the same amount of credit available to businesses of all sizes in the third quarter, but this was expected to change in the fourth quarter.
According to Moneyfacts, the average two-year fixed mortgage rate hit 6.46% this week, which is the highest since the 2008 financial crisis. The average five-year deal was 6.28%.
“The golden age of cheap mortgages is coming to an end, and more interest rate hikes seem to be on the way,” said Myron Jobson, a senior personal finance analyst at the investment platform interactive investor. “Ownership will become more expensive for many people on the property ladder and those trying to get on it for the first time.”
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, tweeted, “The Bank of England’s credit conditions survey shows that lenders were planning to make it harder to get mortgages even before the mini-budget. But the mini-budget has made the rate of decline much faster. “Those who are trying to refinance right now, good luck!”
The Bank survey also showed that mortgage default rates went up slightly between July and September and were expected to go up even more between October and December. Credit card and other unsecured loan defaults are also expected to go up as the cost of living puts more pressure on household budgets.
