Mortgage rates mayhem: Homeowners face crippling rises in bills for years to come - 'Absolute carnage!'

Sold and for sale signs
Homeowners have seen their mortgage rates surge in recent weeks
Richard Jeffries

By Richard Jeffries

Published: 18/06/2023

- 18:51

Updated: 19/06/2023

- 11:00

Finance expert blasts Bank of England for disastrous rate rises which will 'inevitably' drag house prices down

A leading finance expert has attacked the Bank of England for dramatically hiking interest rates and warned the mortgage market is being gripped by a "major panic".

Simon Lambert, Editor of This Is Money, said it is now "absolute carnage', with major lenders pulling deals almost by the hour.

And he warned that worse could be to come, with house prices set to fall in response to the dramatic tightening of credit for homeowners.

He said: "There is a mortgage panic going on. A major panic.

"It is absolute carnage. There is no other way of describing it.

"It is 100 per cent reminiscent of what was going on after Kwasi Kwarteng and Liz Truss's ill-fated mini budget last September.

"Back then, all of a sudden there was an expectation that the Bank of England was going to have to raise interest rates much more than was thought, at which point gilt yields rose substantially.

"That fed through to mortgages rising, based on swap rates, and lenders pulled deals and re-priced them at higher levels. They were doing that rapidly."

He added: "The average two-year fix today is 5.98 per cent. That is pretty high when you were looking at rates in the 2 per cent region not so long ago.

"And that's if you can get the average two-year fix. Brokers are completely flat out and lenders are pulling mortgages left, right and centre.

"People are understandable very concerned. It's a major worry for anyone who has to remortgage right now."

He told the This Is Money podcast: "What appeared to be the trigger for this was the last set of inflation numbers, which showed inflation had actually fallen below 10 per cent, to 8.7 per cent.

"But core inflation remained stubbornly high. It has actually risen. At that point it became clear that the UK's inflation problem is not going away.

"Other bits of data have fed into this. There are real concerns about food price inflation and why it is that other countries seem to have inflation which is falling faster than ours.

"The mortgage market has been sent into a panic, triggered off the back of this expectation that rates are going to go up.

"Not long ago we were thinking that the Bank of England would stop at 4.5 per cent, that that was it, it wasn't going to go any further.

"Now we're talking about [base rate] going to 6 per cent. That is a dramatic shift in expectations and you've got the mortgage market running after those expectations trying to keep up."

Simon Lambert

Simon Lambert has warned of 'carnage' in the mortgage market and predicted house price falls

This Is Money

He added: "What the Bank of England's doing with all these rate rises is trying to crack down on inflation in the future. What it wants to do is crack down on inflationary expectations and prices and businesses/suppliers thinking they can raise their prices and people asking for bigger wages.

"It looks like the mortgage market is running way ahead of the Bank of England and that's leading to the current mayhem. And it is mayhem."

He also went on to blast former Bank of England Governor, Canadian Mark Carney, for misleading the public about how interest rates would rise from their historic lows.

He said: "We were told interest rises would be gradual and limited. We were promised that by Mark Carney.

"We were promised gradual and limited. What we've had is mayhem and carnage.

"I don't envisage any scenario where this doesn't bring down house prices. Ultimately, most people rely on a mortgage to buy a home.

"If the cost of borrowing a mortgage has gone up, you can borrow less money, it's just logical.

"People's monthly payments have increased substantially. They're not able to pay what they could for property anymore.

"I don't see how this isn't going to drag down house prices."

Mark Carney

Former Bank of England Governor Mark Carney said any interest rate rises would be slow and gradual


The squeeze on mortgage holders is set to tighten again this week as the Bank of England gets ready to hike interest rates for the 13th time in a row.

Some analysts are expecting UK interest rates to rise by another 0.25 percentage points on Thursday and say there could be more hikes on the horizon.

It would take the Bank's base rate to 4.75 per cent, helping to drive the cost of borrowing and hitting more than a million mortgage holders whose fixed-rate deals are due to expire soon.

A period of volatility in the mortgage market has seen some major lenders temporarily pausing mortgage applications and increasing their rates in recent days.

HSBC UK briefly took some mortgage products available through brokers off the market last week as it faced high demand from homeowners. It is set to raise mortgage rates for the second time this week.

Santander also temporarily paused some mortgage applications earlier in the week in light of “changing market conditions”.

Around 1.3 million households are expected to reach the end of their fixed-rate term from April to the end of the year, the Bank of England said last month.

The average mortgage holder is looking at a £200 increase in their monthly repayments if their rate goes up by three percentage points.

Myron Jobson, senior personal finance analyst for Interactive Investor, said more “mortgage misery looms” for borrowers set to renew their deal in the second half of this year, “the majority of which were set at interest rates below 2 per cent”.

The Bank of England has said it will continue to raise interest rates so long as it sees signs of inflationary pressure.

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