UK mortgage borrowers brace for rate jump amid global bond sell-off
Summary
Borrowers in the UK are expected to face higher mortgage rates due to rising interest rates influenced by global bond market turmoil and higher inflation concerns. The increase in UK government bond yields, driven by oil price rises and geopolitical tensions, has pushed up swap rates, which lenders use to set mortgage prices.Key Facts
- UK swap rates, used to price mortgages, hit a three-year high recently.
- The five-year swap rate reached 4.52%, the highest since October 2023.
- Rising oil prices and US-Iran military tensions have raised inflation fears.
- These fears caused investors to sell bonds, increasing bond yields and pushing up borrowing costs.
- Higher bond yields raise loan interest rates for credit cards, mortgages, and car loans.
- UK government bond yields briefly hit their highest level since 2008.
- The UK prime minister promised fiscal responsibility to stabilize markets in an autumn budget.
- Fixed mortgage rates stayed steady, with average two-year fixed rates around 5.59% and five-year at 5.63%.
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