Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Chicago Mercantile: Certain market data is the property of Chicago Mercantile Exchange Inc. US market indices are shown in real time, except for the S&P 500 which is refreshed every two minutes. Your CNN account Log in to your CNN account Her plan to go on a £45 billion ($57 billion) borrowing binge stoked fears that the UK’s public finances were on an unsustainable path. Gilt yields, which move in the opposite direction to gilt prices, soared in late September as investors rushed to sell their holdings following the disastrous “mini” budget conceived by Truss and her government. Likewise, Paul Dales, chief UK economist at Capital Economics, told CNN: “Banks’ cost of borrowing has gone up, so they have to pass on that cost to borrowers through mortgages.” “We’ve had to reflect that in our mortgage rates,” the spokesperson said. (HBCYF) told CNN that it had temporarily withdrawn some of its mortgage products last week, and that it would hike rates on some of its mortgages from Thursday.Ī spokesperson for HSBC UK said the bank aimed to provide its customers with “good deals,” but that its funding costs had increased over the past few days. With 800,000 fixed-rate mortgages due to expire in the latter half of this year, according to UK Finance, an association of banks and financial service providers, borrowers are bracing for another nasty shock to their monthly outgoings when they refinance. That’s lower than the 6.7% it hit last October, but still far above the 3.4% it stood at a year ago.Īccording to an analysis by Samuel Tombs, chief UK economist at Pantheon Macroeconomics, the average household on a two-year fixed-rate mortgage that covers 75% of the property’s value can expect to pay up to £500 ($634) more a month if it were to refinance today. The average rate on a two-year fixed-rate mortgage stood at 5.9% on Wednesday, according to data from product comparison website Moneyfacts. The interest rate on the typical UK mortgage may have dropped since the drama of last fall, but it has been steadily rising since the start of May as inflation has proved stickier than the central bank expected. That’s bad news for millions of mortgage borrowers in the United Kingdom, he said, given the “very strong correlation” between gilt yields and interest rates on fixed-term mortgages. Inches, who oversees £40 billion ($51 billion) in fixed-income assets such as bonds, said that this time “economic fundamentals,” rather than political missteps, were boosting gilt yields. The figures have pointed to persistent inflationary pressures, increasing the chances of more interest rate hikes by the Bank of England and driving up gilt yields.Ĭraig Inches, a senior fund manager at Royal London Asset Management, told CNN there had been a “big, big change in the expectation of interest rate moves.” Gilt yields shot up on Tuesday after official data showed the fastest growth in UK wages on record - when excluding a rebound from the pandemic - in the three months to the end of April. That is the highest level since the 2008 financial crisis and above the peak hit last fall when the UK government bond, or gilt, market was thrown into turmoil by the prospect of unfunded tax cuts and higher borrowing planned by then-Prime Minister Liz Truss. The yield on the country’s two-year government bonds - which is used to set interest rates on mortgages - jumped to 4.87% on Tuesday. Existing and aspiring UK homeowners are bracing for a fresh wave of misery as a rise in benchmark borrowing costs threatens to push up monthly mortgage payments.
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