Millions braced for mortgage rate leap by Finance News Bulletin

Published: 12/11/07

POLL: How high will rates have to go before you create having to think hard about your mortgage repaymentsWhat will your home be worth if the marketplace returns to levels of 2001 or even 1995

House price crash calculatorMonthly expenditure agreed last month on two-year, £150,000 loans were almost £200 higher than in 2005It shows the combined effect of store of England bottom rate rises and aggressive increases in financial firms' lending rates next August's financial crisisThe trend in two-year fixed rates before this year had been downwards

For instance, monthly repayments cut down by £32 between October 2004 and 2006, and by £47 between 2003 and 2005But the Bank of England lifted its main rate five times between imposing 2006 and July this year, send-off it at its highest level since 2001The standard rate on two-year fixed mortgages, some of the most well-liked products on the market, is now 613% compared with only 4

6% two existence agoThat amounts to a 33% trek in borrowing costs Yet family incomes have risen now over 8% in the same periodBanks are increasing borrowing costs to shore up their earnings, as the monetary industry buckles under the weight of defaulting American loans

George Buckley, an economist with Deutsche Bank, said: 'This is leaving to be the largest repayment shock on evidence When people come to refinance their mortgages they are leaving to have to pay a lot more than the last time they fixed their mortgage rates'This comes at a chiefly bad time for consumers Taxes have gone up, confidence has fallen, and populace are having to think about putting more money absent for their pensions

Growth in incomes is also weak'It looks improbable that today's rates are leaving to fall quickly And even if the store cuts official interest rates, it may take some time for mortgage rates to go after'Lending between banks evaporated in the summer, most important to the crisis at Northern Rock - the first sprint on a UK bank since Victorian times

While the US central Reserve has since shaved three-quarters of a point off American interest rates to manage with the crisis, the store of England left base rates unchanged at 575% on ThursdayMeanwhile UK banks have been rising the rates they demand from clientele and reining in the supply of loans, as they attempt to improve their financesFor example, average tax charged on overdrafts have surged to 17

6% in October, the uppermost since August 2001The dramatic increases in the cost of borrowing could cripple the housing market and guide to declining principles, says Citigroup economist Michael SaundersHe said buy-to-let investors are particularly susceptible, pointing out that the number of mortgages on offer to them has shrunk by 40% since JulyHe added: 'The housing market will weaken piercingly, reflecting the toxic mix of far above the ground interest rates, very stretched values, far above the ground private debts, plus the continuing crisis in money and credit markets

'Recent data suggests this weakness is pending through House price inflation is now tumbling - with more hints that prices are in fact falling'Growing numbers of consumers are having loan applications twisted down, while a number of providers are pulling out of the market altogetherindividual loan acceptances have fallen every month since April as lenders make tighter their lending criteria

It said about 67% of applications were accepted in April Last month, that figure had fallen to 52%With credit cards, 17% more applicants were turned down between March and September than during the previous six monthsThe financial information collection Moneyfacts

couk said three firms had quit the individual loans market during the past week, including Liverpool VictoriaIt was also reported that 32 loan providers had raised their rates since the bottom rate last went up in July, with lenders charging as much as 3% morechoose a loan word 12 months (1 year) 24 months (2 years) 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 years) 108 months (9 years) 120 months (10 years)Please select a kind of insurance Life insurance Home and contents Car Breakdown armed forces Health - medical Health - dental Travel favorite - dog favorite - cat GOThinking about investing in possessions

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