Houses pictured on 8th June 2023 in Halifax, United Kingdom. U.K. borrowers are facing sharply higher mortgage costs.
LONDON — U.K. borrowers are facing a cliff edge that could damage the economy as rising mortgage costs hit deal renewals and the number of products available shrinks, experts warned Monday.
New figures from financial information company Moneyfacts showed the average two-year fixed rate mortgage on a residential property in Britain rose from 5.98% Friday to 6.01%, its highest level since Dec 1.
The spike in late 2022 came in the wake of the government's market-rattling mini-budget. Prior to this, Moneyfacts said two-year fixed rates were last above 6% in November 2008.
The number of residential mortgage products available has also fallen, from 5,264 on May 1 to 4,683.
Martin Stewart, director of mortgage advisory London Money, said the last nine months had been "seismic" for the mortgage and housing sector, "on a par with the financial crisis," although with different causes.
"The market is dysfunctional and arguably broken. We have seen evidence where advisers are in queues alongside 2,000 others all trying to secure something that might not actually exist by the time they get to the front of the queue," Stewart told CNBC.
"Pretty much everything is starting with a 5 now ... for context, two years ago everything started with a 1 or lower."
The average rate for a five-year mortgage is currently 5.67%, according to Moneyfacts.
Asked about support for struggling households, Prime Minister Rishi Sunak on Monday told ITV's Good Morning Britain program that the government's priority was halving inflation and it needed to "stick to the plan."