Eurozone crisis will mean higher mortgages in the UK, Bank of England warns
Millions of home owners in the UK are facing sharp rises in mortgage rates as a result of the chaos in the Eurozone, according to the Bank of England.
The monetary crisis in the Eurozone is driving up the cost of borrowing for high street banks in the UK and they are set to pass it on to the 11.2million mortgage holders in the country.
The banks will pass on the cost so that they can restore their profit margins by raising rates. The Bank of England said average rates on new tracker mortgages had already risen by 0.5% in the eight months to April.
It means that many home owners will have to find thousands of pounds extra a year and some will be pushed over the edge as they are already struggling to find the money to make their monthly repayments.
‘In the absence of falls in funding costs, it suggests that some further increase in mortgage rates is likely as banks seek to restore their margins,’ said the Bank of England in its latest inflation report.
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Some of the biggest mortgage lenders, such as Halifax, the Co-op and Yorkshire Bank, have already hit their customers with an increase in their standard variable rate loans, the type of loan which home owners are automatically moved on to when their current deal, such as a two year fixed loan or a three year tracker, comes to an end.
According to the latest figures from the Council of Mortgage Lenders up to eight million home owners are thought to be on a variable rate. This includes those on tracker deals as well as those on the SVR. However, many of those on fixed rates will have to remortgage in the coming months as their deal expires.
Higher rates are being introduced on a weekly basis. Last week the Yorkshire Building Society raised its two year fixed rate loan from 3.24% to 3.54%. This week ING Direct is expected to raise its two year fixed from 3.29% to 3.49%.
Although a number are trying to compensate for the blow by offering incentives such as reduced arrangement fees or no fees for first time buyers. Experts advise new buyers and existing owners to shop around for the best deal.