Homeowners panic over fears of time bomb for mortgages

SOARING interest rates and fears of a looming house price crash have sparked panic among homeowners.

Analysts predicted yesterday that spiralling home loan repayments could cause house prices to plummet by up to 15 per cent by the end of next year.

The warning came as lenders continued to pull mortgage deals in response to predictions that interest rates could hit 6 per cent next year.

Experts described the escalating chaos as ‘catastrophic’ and warned that millions of borrowers were sitting on a ‘ticking time bomb’.

Fears are also mounting that some middle-class families who stretched their budgets to buy bigger properties may soon be unable to afford to stay in their own homes. Many first-time buyers could also find that even after scraping together a deposit, they are now unable to afford a mortgage.

In what has been called the worst week for the mortgage market since the finan

‘The market is a car crash’

cial crisis, a record 1,000 home loans were withdrawn by lenders on Tuesday. This was double the 462 products removed during the pandemic in April 2021, said data analyst Moneyfacts.

Borrowers desperate for advice struggled to reach lenders yesterday as helplines went into meltdown. With deals vanishing within hours, many may have missed out on the chance to lock into a more affordable rate.

Just after 10am yesterday, Barclays emailed brokers to say it had reached its daily booking limit. The bank confirmed it was withdrawing seven fixed deals for new borrowers overnight, while TSB said it was pulling six deals with immediate effect.

The Principality Building Society also suspended its entire mortgage range, citing ‘extreme market volatility’.

Experts said big high street names should return to the market in days, but smaller firms may be unable to offer deals for months.

Firms are also increasing the cost of the few fixed deals on offer. Nationwide raised its two-year fixed rate to 5.59 per cent, compared with 2.54 per cent only three months ago. Halifax also increased its two-year fixed rate from 3.96 per cent to 4.29 per cent.

According to Bank of England data, more than two million homeowners with fixed-term mortgages will need to remortgage between now and the end of 2024. They face paying thousands more at a time when budgets have already been battered by rising living costs. Consumer champion Martin Lewis labelled the crisis ‘catastrophic’ and admitted he did not know how to advise homeowners.

He told ITV’s This Morning yesterday that if rates go up as high as feared, the country is ‘sitting on a mortgage ticking time bomb’.

Sebastian Murphy, of JLM Mortgage Services, said: ‘The market is a bit of a car crash at the moment because lenders have been completely wrong-footed.

‘Many will be raising rates to slow the flow of business, but you can’t have customers going from a 1.5 per cent deal to a 6 per cent deal. It’s adding hundreds of pounds on to some monthly repayments.’

Ray Boulger, of John Charcol, predicted house prices could fall by 10 per cent by the end of next year, although analysts at the financial services firm Credit Suisse suggested it could be as much as 15 per cent.

Liam Anstruther, director of the Fife-based Mortgage Advice Club, said: ‘At the moment we are seeing homes selling for 8 to 14 per cent above home report, but it will start to go back to pre-Covid levels, going for home report or under.

‘So in that sense, house prices will drop by at least 10 per cent. We’ll see this slowdown as we head towards Christmas and certainly into New Year when the market usually slows down.

‘It depends on how far they go with rates, but it’s going to have an impact on the numbers who wish to buy.’

He said many homeowners would want to remortgage and that it was important they shop around.