Homeowners face the biggest surge in mortgage costs since the property market collapse in 2008 as investors brace for a string of interest rate rises to rein in inflation.
Markets expect a sharp 0.5 percentage-point climb in the interest rate on a new two-year fixed rate mortgage to 1.7pc by the end of next year, a blow to households already facing soaring living costs. An increase on this scale would add almost £50 a month to the cost of paying off a typical £200,000 mortgage.
Households are less immediately vulnerable to a Bank hike than they were a decade ago. However, the effective borrowing cost on all mortgages would still be 0.8 points higher at the end of 2022 than it presently is, according to Pantheon Macro. That would mark the biggest increase in the effective rate since 2008.
Samuel Tombs, economist at Pantheon Macro, said: “Our biggest concern is that the rise in mortgage rates implied by markets’ expectations for the Bank Rate would have a bigger impact on the economy via the housing market.”