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Mortgages get more expensive after Budget & gloomy inflation forecast

·3-min read
Houses in London (PA Archive)
Houses in London (PA Archive)

Mortgages are already getting more expensive just one day after Rishi Sunak’s big-spending Budget was unveiled prompting interest rate fears.

Inflation is expected to reach 4.4 per cent next year stoked by Brexit supply chain bottlenecks and rising energy prices, the Office for Budget Responsibility warned.

They added inflation could hit the highest rate seen in the UK for three decades as the Liberal Democrats warned of the biggest shock to the housing market since the 2008 financial crash.

Experts are now warning families to cut unnecessary spending and make mortgage overpayments now to avoid higher rates later.

Barclays said it was upping rates by up to 0.35 percentage points on a variety of fixed-rate mortgages with Halifax revealing rises of up to 0.20 percentage points on some products from November 1.

HSBC also warned its rates would increase, and NatWest has hiked rates on a range of its fixed mortgages by 0.1 percentage points since Chancellor Rishi Sunak unveiled his Budget on Wednesday.

TSB said they would be increasing their rates tomorrow.

Rushi Sunak leaves No 11 today for his Budget speech (Jeremy Selwyn)
Rushi Sunak leaves No 11 today for his Budget speech (Jeremy Selwyn)

Lib Dem leader Sir Ed Davey accused the Chancellor of creating “the perfect storm”, as families face “the worst time in a generation to be a homeowner”.

He said: “British homeowners face the toxic cocktail of interest rate rises, house prices surges, and council tax hikes just around the corner.

“This ghastly forecast should send a shiver down the Chancellor’s spine. The way he brushed off the cost of living crisis in the budget was careless and completely out of touch with the country. If he can’t get a grip on this cost of living crisis, how on earth is he going to cope with a mortgage crisis?

“People who work hard and play by the rules deserve a fair deal. Enough is enough, it is time to scrap the tax hikes and solve this cost of living crisis to defuse this ticking mortgage timebomb.”

Mortgage expert Lewis Shaw called for calm but told MailOnline that people should “talk to a broker, cut back on unnecessary spending, and make overpayments on your mortgage whilst rates are low”.

It came as the Institute for Fiscal Studies (IFS) said the poorest face “real pain” and middle earners will lose out on a deeper analysis of Mr Sunak’s Budget.

The Chancellor had claimed it was a strategy to “usher in a new age of optimism”, but the leading economic think tank warned the public “may not get much feelgood factor”.

Instead IFS director Paul Johnson said living standards for many will fall with high inflation, rising taxes and poor growth being “undermined more by Brexit than by the pandemic”.

His warning came as the Resolution Foundation said the poorest fifth will be around £280 a year worse off despite the Chancellor softening the blow of his Universal Credit (UC) cut.

Researchers at the living standards think tank said three-quarters of households on the welfare scheme will be worse off despite the new tapering rules announced in the Budget.

Taxes will reach the highest level since the post-war recovery in 1950 and be £3,000 higher for the average UK household compared with when Boris Johnson became Prime Minister in 2019, they added.

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