Mortgage payments could rise by another £100 a month by Friday if the Bank of England takes emergency action to save the plummeting pound.
The Bank Rate could be increased by a further 0.75 percent by the end of the week, the markets expect. Central interest has already risen from 1.75 percent to 2.25 percent.
The move would put mortgage rates beyond 6 percent in the first half of 2023. It comes as Kwasi Kwarteng contends with massive market turmoil sparked by his tax-cutting mini-budget.
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On Monday (September 26) the pound dropped to a record low, falling by more than 4% to just 1.0327 dollars in early Asia trade, before regaining some ground to about 1.07 dollars by the evening.
Lenders were withdrawing some of their mortgages on Monday as uncertainty reigned in the wake of Mr Kwarteng’s £45 billion package of tax cuts set out on Friday. Meanwhile, the Bank of England said it “will not hesitate” to raise interest rates to prop up the value of sterling.
An emergency rate rise by the Bank of England would impact hundreds of thousands of buyers and homeowners searching for a new deal. As per the Telegraph, if the Bank Rate rises to 3pc this week, a buyer purchasing an average £295,750 property with a 25pc deposit on a two-year deal would see their monthly mortgage payments jump from £1,188 to £1,283 – an overnight rise of almost £100 a month, according to analysis by estate agency Hamptons.
The same mortgage would have cost £889 a month in November last year, before the first increase to the Bank Rate. Meanwhile, monthly mortgage payments for a first-time buyer purchasing an average £243,700 home with a 10pc deposit on a two-year fix are expected to rise from £1,209 to £1,304 by the end of the week.
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