“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investors Service said in a report.
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LONDON – Britain’s largest bank temporarily withdrew mortgage deals through brokerage services on Thursday as the fallout from rising interest rates rippled through the UK housing market.
HSBC told CNBC on Friday that it is regularly reviewing the situation, but did not specify whether the new deal differs from previous offerings. Given that the Bank of England is continuing to raise interest rates, an increase in interest rates is possible.
Eight months ago, hundreds of mortgage deals were withdrawn a day after market turmoil stoked concerns about a rise in benchmark interest rates.
In a statement issued on Friday, HSBC said: “We occasionally need to limit the amount of new business that can be conducted through our broker each day. All products and rates remain available to existing customers and we will continue to review the situation regularly.”
The banking group said the agreement was to ensure it met its “customer service commitment”, stressing that it remained open to new mortgage business.
soaring interest rates
HSBC’s decision comes as analysts expect mortgage rates to soar and house prices to plummet as the benchmark rate rises.
A large number of fixed-rate mortgage deals are coming due this year, leaving homeowners vulnerable to higher interest rates, according to economic research firm Capital Economics.
The group revised its mortgage rate forecast upwards, suggesting that borrowers would be “received a larger rate shock than … previously envisaged.”
“Those coming out of a 2-year fixed term will see their mortgage costs increase significantly. While people refinancing a 5-year fixed term this month may see their mortgage rates jump from 2.1% to 4.9%, the Those on a 2-year fixed rate will increase from 1.4% to 5.2%,” Capital Economics said in a report on Thursday.
There have also been warnings that house prices will plummet over the next two years, with credit ratings agency Moody’s predicting a 10 per cent fall in house prices.
“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investors Service said in a report.
UK house prices were flat in May after falling 0.4% in April, with the average UK house price now at £286,532 ($360,000), the Halifax House Price Index showed.
UK House Prices in February It experienced its worst contraction since November 2012, according to the National Building Institute.
Prices fell 1.1% year over year, the first annual decline since June 2020.
The Bank of England raised interest rates to 4.5% from 4.25% as the central bank tries to combat high inflation, which is now well above its 2% target of 8.7%.
The Organization for Economic Co-operation and Development predicts Britain will have the highest inflation rate of any advanced economy this year.
Lenders and homeowners will be closely watching the central bank’s next benchmark interest rate decision on June 22. The bank is widely expected to agree to a 13th consecutive rate hike.