U.K. Housing Market Faces Renewed Strain as Mortgage Rates Rise Again

On June 9th, the average rate on a two-year mortgage deal across the range of loan-to-value ratios rose to 5.82% compared to 5.30% a month ago.

The increase in mortgage rates came after British inflation data in May sparked a jump in market interest rates as investors anticipated more increases in borrowing costs from the Bank of England.

As a result, interest rates offered by mortgage lenders have also soared, leading to HSBC temporarily withdrawing mortgage products for new customers and Nationwide Building Society raising its mortgage rates.

Consultancy Oxford Economics predicted a 10% peak-to-trough drop in house prices based on the BoE raising interest rates to 5%.

The increase in mortgage rates is likely to maintain the squeeze on household finances and lead to an increase in financial stress, potentially resulting in a rise in the number of forced sales.