“Persistently high inflation and the recent rise in lending rates will prompt a correction in the UK housing market (Aa3 negative),” Moody’s Investor Service said in a report.
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LONDON – Britain’s biggest bank temporarily withdrew mortgage contracts through brokerage services on Thursday as the impact of higher interest rates ripples through Britain’s housing market.
HSBC told CNBC on Friday that it regularly reviews the situation, but did not specify whether the new deals would differ from its previous offerings. Higher rates are possible as the Bank of England continues to raise interest rates.
It comes eight months after the hundredSeveral mortgage offers have been withdrawn within a day after market chaos at the time fueled fears of rising prime rates.
In a statement issued on Friday, HSBC said: “We occasionally need to limit the amount of new business we can accept through brokers each day. All products and rates for existing customers are still available and we continue to review the situation regularly.”
The banking group said the protocol was to ensure “customer service commitments” were met and stressed it remained open to new mortgage business.
Rising rates
HSBC’s decision comes as analysts expect mortgage rates to rise and house prices to fall sharply in response to an increased base rate.
A large number of fixed-rate mortgage deals are due to expire this year, leaving homeowners vulnerable to the impact of rising interest rates, according to economic research firm Capital Economics.
The organization has revised its mortgage rate forecasts upwards, saying borrowers will be “exposed to a larger interest rate shock than previously thought”.
“Those ending a 2-year fix will see a particularly big rise in mortgage costs. While those refinancing a 5-year fix this month could see their mortgage rate jump from 2.1% to 4.9%, a 2-year fix will see an increase from 1.4 % to 5.2%,” Capital Economics said in a note published on Thursday.
There are also warnings that property prices will fall over the next two years, with Moody’s predicting a 10% drop.
“Persistently high inflation and the recent rise in lending rates will prompt a correction in the UK housing market (Aa3 negative),” Moody’s Investor Service said in a report.
The Halifax House Price Index showed UK house prices were flat in May after falling 0.4% in April, while the average UK property now costs £286,532 ($360,000).
UK house prices in February experienced the sharpest contraction since November 2012according to the building savings bank Celestátní.
Prices fell 1.1% year-on-year, marking their first year-on-year decline since June 2020.
The Bank of England has raised its interest rate to 4.5% from 4.25% as the central bank struggles to deal with high inflation. which is currently well above the 2% targetin the amount of 8.7%.
The Organization for Economic Co-operation and Development predicts that the UK will have the highest inflation rate of any advanced economy this year.
Lenders and homeowners will be watching the central bank closely for its next key rate decision on June 22. The bank is widely expected to approve its 13th consecutive hike.