Kwasi Kwarteng, the Chancellor of the Exchequer who has only just got his feet under the table a week or so ago, faces a barrage of criticism after his mini budget has forced a host of mortgage lenders to withdraw their products.
Interest Rates To Be Ramped Up In A Bid To Curb Inflation
Many economists are predicting that the government’s economic plans could lead to a 10% to 15% drop in house prices. And the Bank of England is ready to move in and further ramp up interest rates in a bid to curb inflation, which they believe has become more likely to rise quickly since Kwasi Kwarteng’s announcements. The predicted rise in interest rates is what has driven many mortgage lenders to withdraw their offers.
Michael McCord, who compiles the Ulster University house price index, sees these mortgage lenders putting their offers back on the table but at much higher rates. He is quoted in the Belfast Telegraph as saying:
“We have consumers coming to the end of their terms and a core issue is that they actually might not qualify or pass the affordability checks with their current lender for their current property on their existing loan, which would be perilous,” he said.
‘Mr McCord warned that some first-time buyers could be “locked out of the market and locked into the private rental sector” because of the rising upfront costs of getting a mortgage.’
Thousands Of Homeowners Are No Facing Huge Hikes In Their Mortgages
And in the same article the UUP’s finance spokesperson Steve Aiken said the mini-budget was a huge gamble by the Conservative government. He said:
“In a few short days the very underpinnings of our economy have been threatened. More worryingly, thousands of homeowners are now facing huge hikes in their mortgages, coupled with those who will now be excluded from home ownership. They are now facing a personal financial crisis. A crisis that will only be compounded by spiralling energy costs and food inflation.
“The problems with interest rate rises and mortgage shortages cannot be blamed on Putin, or any other factor. This potential disaster sits fully in the lap of the Prime Minister and Chancellor. They have very little time to fix the problem and must act now. Doubling down on a gamble is madness,”
It does seem a strange move by the government to take such a big gamble, with Liz Truss only installed in Downing Street a short time ago. Time will tell whether the gamble will pay off in the long term but the omens so far are not good.