The war in the Middle East is set to hit homeowners in the UK harder than Americans or Europeans. <\/p>\n
Mortgage rates across the world have risen amid fears that central banks will have to raise interest rates to counteract a surge in inflation caused by the squeeze on oil and gas supplies. <\/p>\n
But UK homeowners appear to be having it worse. The average two-year fixed rate has gone up 0.91 percentage points to 5.75 per cent since the conflict began at the end of February, according to the financial data firm Moneyfacts. This would mean an extra \u00a3107 a month on a \u00a3200,000, 25-year mortgage, with repayments up to \u00a31,258. <\/p>\n
By comparison, the average 30-year fixed rate in the United States (the most popular type of home loan) has risen only 0.38 percentage points to 6.36 per cent, according to the Federal Reserve Bank of St Louis. In Germany, Europe\u2019s largest economy, mortgage rates have risen about 0.3 percentage points, according to the Financial Times.<\/p>\n
Experts said the UK was more reliant on imported gas and oil and so likely to suffer higher inflation earlier. <\/p>\n
Yields on ten-year UK government bonds (gilts) are up 0.6 percentage points to 5.18 per cent since the start of the year. Higher gilt yields are usually a sign that investors are worried about high interest rates. The Spanish bank Caixa said that ten-year US government bond yields have risen 0.42 percentage points this year, ten-year German government bond yields 0.31 percentage points and ten-year French government bonds 0.26 percentage points.<\/p>\n
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Richard Carter from the wealth manager Quilter Cheviot said: \u201cMortgage rates and bond yields are responding to the same underlying driver \u2014 a sharp rise in inflation expectations linked to higher energy prices from the Middle East war. The UK has been hit harder than some of its peers because it is particularly exposed to imported inflation, so rises in oil and gas prices feed through more quickly.<\/p>\n
\u201cThat has pushed gilt yields up more sharply, with investors also sensitive to factors including political uncertainty and the prospect of higher government borrowing and the watering down of fiscal rules in the event of a change in the prime minister.\u201d<\/p>\n
The consumer prices index measure of inflation was 3.3 per cent for the year to March, above the Bank of England\u2019s 2 per cent target and up from 3 per cent in February. The data for the year to April will be released on Wednesday.<\/p>\n
Why our short fixes can cause the most pain<\/p>\n
UK homeowners are more likely to face mortgage shocks than those in other nations because most are on shorter fixed rates of two to five years. Some 1.8 million fixed deals are due to end this year, according to the trade body UK Finance, with about half of those being taken out in 2021, when interest rates were low.<\/p>\n
Mortgage deals in Denmark, France, Germany, the Netherlands, Spain and the United States tend to be for longer periods, offering more insulation from rate fluctuations.<\/p>\n
Some 92.4 per cent of new home loans taken out in the UK in the final three months of last year were fixed-rate deals of up to five years, according to the European Mortgage Federation, the highest of any major European country except the Czech Republic. <\/p>\n
Rachael Hunnisett from April Mortgages, a Dutch-owned UK lender that offers five to 15-year fixes, said: \u201cMost UK banks are funded in ways that make longer-term fixed rates expensive and riskier than offering short-term fixed rates. The UK homeowner is then left shouldering the majority of the rate fluctuation risk. We are seeing this play out in the market with many borrowers coming to the end of a short-term fixed mortgage and having to simply put up with rate shock.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The war in the Middle East is set to hit homeowners in the UK harder than Americans or…\n","protected":false},"author":2,"featured_media":591072,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":["post-591071","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/591071","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=591071"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/591071\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/591072"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=591071"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=591071"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=591071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}