Mortgage Shock Awaits UK Homebuyers After Pandemic Tax Break
Comment of the Day

September 02 2022

Commentary by Eoin Treacy

Mortgage Shock Awaits UK Homebuyers After Pandemic Tax Break

This article from Bloomberg may be of interest to subscribers. Here is a section:

The UK’s tax holiday on property purchases during the pandemic seemed like a dream chance to buy a home. For many who did, it may soon look more like a nightmare.

A huge cohort of purchasers opted for cheap two-year mortgages and are due to refinance by September 2023. But borrowing costs have risen to a multi-year high, meaning their new monthly housing payments may be 25% higher, or even more.

The relief on the stamp-duty levy ran from July 2020 to September 2021. About 42% of borrowers in that period, which includes those remortgaging, fixed for only 24 months, according to data from UK Finance.

The ticking clock means homeowners are quickly having to come to terms with something they haven’t dealt with in years -- sharply higher interest rates and a risk of a housing correction. Traders are betting the Bank of England will raise its key interest rate by 250 basis points to 4.25% by March. A year ago, the benchmark was just 0.1%.

That’s just one of multiple shocks battering consumers right now as energy bills surge and inflation jumps above 10%, the fastest in four decades

Eoin Treacy's view

The Pound remains in a downtrend against the dollar but is now also pulling back sharply against the Euro. The weight of energy prices, interest rates and inflation are hitting consumer spending and contributing to negative sentiment.

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