Mortgage Interest Rates Continue To Rise

4th November 2022

The Bank of England's Monetary Policy Committee meeting yesterday discussed the rising cost of borrowing especially for mortgages.

Lending rates for new mortgages had increased sharply since the MPC's previous meeting, reflecting the sharp rise in risk-free market rates during the period as well as increases since the August Report. The monthly average quoted rate on a two-year fixed-rate 75% loan-to-value (LTV) mortgage had increased from 3.6% in August, to 4.2% in September. Preliminary data suggested that the rate had increased significantly further to 6.0% in October, its highest rate since 2008. Rates had increased across all major LTV categories, with the pass-through of higher reference rates occurring faster than had typically been the case in the past. Reference rates had fallen back from their highs in late September, and there had been moderate falls in some mortgage rates in the days leading up to this MPC meeting.

During the period of volatility in UK interest rate markets, the number of available mortgage products across all LTVs had fallen sharply for a short period. The number of available products had since recovered somewhat, but remained below its previous level. Interest rates on some unsecured household borrowing products had also increased since the MPC's September meeting. Lenders had reported in the latest Credit Conditions Survey (CCS), which had been carried out before the exceptional volatility in UK interest rate markets, that credit availability had declined in 2022 Q3 for both secured and unsecured household borrowing and that further declines were expected in Q4.