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Injin

Buyers Face Hike In Mortgage Rates As Inflation Fears Mount

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http://www.guardian.co.uk/money/2009/jun/1...tion-nationwide

Homebuyers are facing their first rise in mortgage rates for a year in a move by banks and building societies that could extinguish the nascent recovery in the housing market.

Nationwide was one of several leading mortgage lenders that today hiked the cost of its most popular deals, with others likely to follow suit in the coming days.

Banks and building societies are increasing the cost of their fixed-rate mortgages, the type of deal that around 80% of homebuyers are opting for at the moment. Nationwide has upped the cost of its fixed-rate deals by up to 0.86%, and state-owned Northern Rock has raised its five-year fixed rates by 0.2%, both with effect from tomorrow. Ray Boulger at mortgage broker John Charcol said most, and possibly all, of the part-nationalised Lloyds Banking Group – which includes Halifax, Bank of Scotland, Lloyds TSB and Cheltenham & Gloucester – were expected to increase their fixed rates this weekend or on Monday, "in some cases by quite large amounts". Yorkshire Building Society has already hiked the cost of its deals, and Principality Building Society also made changes to its range today.

Boulger warned that if rates rise too far, too fast, "it could very easily nip the recovery in the housing market in the bud".

Britain's banks are raising mortgage costs after an increase in their own funding driven by government bond yields. As investors have become more optimistic about the health of the UK economy, they have begun to fret about the return of inflation. That has prompted them to sell government bonds, known as gilts, whose long-term value is eroded by high inflation. When the price of gilts falls, their yield – the interest rate the government must pay to borrow – goes up. Today the yield on 10-year gilts hit a seven-month high of 4.01%. Since many other interest rates across the economy are set with reference to gilt yields, this increase is feeding through to borrowing costs for ordinary families and businesses.

Fears of inflation are rising, because:

• Oil prices have more than doubled, hitting an eight-month high of $72 a barrel yesterday;

• Manufacturing output in the UK increased in April, prompting predictions that the recession is coming to an end;

• There are fears the Bank of England's £125bn quantitative easing policy could feed through into rising prices if consumer demand recovers rapidly.

(And the real reason, that the BoE are printing money like Billy-o - Injin.)

The news that mortgage costs are rising came as the Bank of England announced that up to 1.1 million households have been plunged into negative equity by the property crash. With prices down by 20% from their peak in autumn 2007, research by the Bank published tomorrow suggests that between 700,000 and 1.1 million homeowners now owe more on their mortgage than their house is worth.

The Bank's nine-member monetary policy committee will be alarmed at the rise in mortgage costs. After slashing interest rates to just 0.5%, their lowest level ever, they embarked on the drastic policy of quantitative easing – buying up billions of pounds worth of government bonds – to bring down borrowing costs and boost lending to cash-strapped families and businesses.

There are growing signs that the housing market is experiencing a spring bounce. Figures issued by the Council of Mortgage Lenders today showed a 16% jump in mortgage lending to people buying a home during April.

Darren Cook, a spokesman for the financial data firm Moneyfacts, said the price of two-year fixed-rate mortgages had been falling for 12 months, until now. "The last time mortgage lenders were stumbling over each other trying to increase their fixed-rate mortgages was back in June 2008. At that time, inflation was nearly hitting 4%," he added.

David Hollingworth at mortgage broker London & Country said a "tipping point" had been reached. "You have to remember that mortgage rates have been at all-time lows, and at the end of such a period there always comes a tipping point. It looks as though we're now there, and all the signs suggest fixed-rate mortgage rates are only heading one way – upwards. The fear is that once interest rates start rising, they will go up quite rapidly. When a few lenders start raising rates, the rest of the market are quick to follow."

Recovereh?

Edited by Injin

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http://www.guardian.co.uk/money/2009/jun/1...tion-nationwide

Homebuyers are facing their first rise in mortgage rates for a year in a move by banks and building societies that could extinguish the nascent recovery in the housing market.

Nationwide was one of several leading mortgage lenders that today hiked the cost of its most popular deals, with others likely to follow suit in the coming days.

Banks and building societies are increasing the cost of their fixed-rate mortgages, the type of deal that around 80% of homebuyers are opting for at the moment. Nationwide has upped the cost of its fixed-rate deals by up to 0.86%, and state-owned Northern Rock has raised its five-year fixed rates by 0.2%, both with effect from tomorrow. Ray Boulger at mortgage broker John Charcol said most, and possibly all, of the part-nationalised Lloyds Banking Group – which includes Halifax, Bank of Scotland, Lloyds TSB and Cheltenham & Gloucester – were expected to increase their fixed rates this weekend or on Monday, "in some cases by quite large amounts". Yorkshire Building Society has already hiked the cost of its deals, and Principality Building Society also made changes to its range today.

Boulger warned that if rates rise too far, too fast, "it could very easily nip the recovery in the housing market in the bud".

Britain's banks are raising mortgage costs after an increase in their own funding driven by government bond yields. As investors have become more optimistic about the health of the UK economy, they have begun to fret about the return of inflation. That has prompted them to sell government bonds, known as gilts, whose long-term value is eroded by high inflation. When the price of gilts falls, their yield – the interest rate the government must pay to borrow – goes up. Today the yield on 10-year gilts hit a seven-month high of 4.01%. Since many other interest rates across the economy are set with reference to gilt yields, this increase is feeding through to borrowing costs for ordinary families and businesses.

Fears of inflation are rising, because:

• Oil prices have more than doubled, hitting an eight-month high of $72 a barrel yesterday;

• Manufacturing output in the UK increased in April, prompting predictions that the recession is coming to an end;

• There are fears the Bank of England's £125bn quantitative easing policy could feed through into rising prices if consumer demand recovers rapidly.

(And the real reason, that the BoE are printing money like Billy-o - Injin.)

The news that mortgage costs are rising came as the Bank of England announced that up to 1.1 million households have been plunged into negative equity by the property crash. With prices down by 20% from their peak in autumn 2007, research by the Bank published tomorrow suggests that between 700,000 and 1.1 million homeowners now owe more on their mortgage than their house is worth.

The Bank's nine-member monetary policy committee will be alarmed at the rise in mortgage costs. After slashing interest rates to just 0.5%, their lowest level ever, they embarked on the drastic policy of quantitative easing – buying up billions of pounds worth of government bonds – to bring down borrowing costs and boost lending to cash-strapped families and businesses.

There are growing signs that the housing market is experiencing a spring bounce. Figures issued by the Council of Mortgage Lenders today showed a 16% jump in mortgage lending to people buying a home during April.

Darren Cook, a spokesman for the financial data firm Moneyfacts, said the price of two-year fixed-rate mortgages had been falling for 12 months, until now. "The last time mortgage lenders were stumbling over each other trying to increase their fixed-rate mortgages was back in June 2008. At that time, inflation was nearly hitting 4%," he added.

David Hollingworth at mortgage broker London & Country said a "tipping point" had been reached. "You have to remember that mortgage rates have been at all-time lows, and at the end of such a period there always comes a tipping point. It looks as though we're now there, and all the signs suggest fixed-rate mortgage rates are only heading one way – upwards. The fear is that once interest rates start rising, they will go up quite rapidly. When a few lenders start raising rates, the rest of the market are quick to follow."

Recovereh?

Just as well I fixed for 5 years at 4.79% today then. One things for certain they certainly aren't going to be any lower than now for a long, long time.

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do you see base rates in the uk rising in july or when...?

Gordons going to avoid it as long as possible, he knows as soon as they start going up any chance he has of winning the election is gone.

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Gordons going to avoid it as long as possible, he knows as soon as they start going up any chance he has of winning the election is gone.

What's Gordon got to do with it?

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When a few lenders start raising rates, the rest of the market are quick to follow."

:) lets squeeze the debt slaves a little more ..........

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Mortgage rates depend on various factors, not just base rates.

Exactly. There is a MASSIVE margin between real mortgage rates and the BoE base rate. Base rate at 0.5% is mainly benefiting those on trackers.

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Gordons going to avoid it as long as possible, he knows as soon as they start going up any chance he has of winning the election is gone.

i'm inclinded to go with yellercat's answer, but i concede brown bears down as much as he can for short-term political gain to feed the credit junkie public he pretty much spawned

I would have though the base rate is fairly meaningless when commercial banks are being handed hundreds of billions of £ from the BoE in exchange for worthless securities.

yes agree of course, but just wondered if they'll push the base up - or more to the point will the banks be forced to pay savers more or will they just keep the margin?

Mortgage rates depend on various factors, not just base rates.

agree, see above

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Just as well I fixed for 5 years at 4.79% today then. One things for certain they certainly aren't going to be any lower than now for a long, long time.

Hope you've got a very good equity cushion there then. You're gonna need it if the current recovery falters.

Here comes the housing bulls' blind panic phase ...

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Homer: When was the last time Barbara Streisand cleaned out your garage? And when it's time to do the dishes...where's Ray Boulger? I'll tell ya! (shouting) Ray Boulger...is lookin' out for Ray Boulger!

I always think of that Homer quote everytime I read about Ray Boulger from John Charcol... which seems to be a lot.

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Hope you've got a very good equity cushion there then. You're gonna need it if the current recovery falters.

Here comes the housing bulls' blind panic phase ...

looks that way,

i have to say i saw so many sold boards today (SE Essex) --- i will resent yet more of my tax money going to pay benefits to people who may pretty soon not be able to repay the mortgage, there has to be a limit to bailing out the feckless time after time after time, they wont learn if nanny always comes running and more to the point its the rest of us paying for that inexperience and impatience

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Guest spp

It's ok...we never seen it coming!

Didn't we? :blink:

Will all those green shooters on tracker mortgages notice the fixed rates running away from them!?

:huh:

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It's ok...we never seen it coming!

Didn't we? :blink:

Will all those green shooters on tracker mortgages notice the fixed rates running away from them!?

:huh:

nah, too busy enjoying themselves, mortgages are so cheap now don't ya know.

am sick of hearing how mortgages are so cheap now and how everyone is paying so much less per month, dumbfecks, but must confess that as much as I want to see that smugness gone and people choking on their words I do not relish the prospect of any potential price drops being swallowed up by mortgage interest.

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