Mortgage woes ‘to get worse’ due to soaring interest rates, lenders warn
MORE stress is on the way for homeowners due to soaring interest rates, leading lenders warned yesterday.
And they admitted that the financial crisis is causing them to cut back on lending to property buyers.
MPs on the Treasury Select Committee yesterday grilled some of the UK’s biggest lenders on how rising mortgage costs would start to impact households.
Charlotte Harrison, head of mortgage products at Skipton Building Society, said: “Over the next six months we will see more customers with financial stress.”
Around 1.4million households will face a mortgage shock later this year when their mortgage secured in 2021 will come up for renewal at a much higher rate.
Nationwide home commercial director Henry Jordan said mortgage rates of between 6.25 and 6.5 per cent could be the “tipping point” in stretching customers’ finances.
The average two-year fixed rate is now 6.66 per cent, the highest in 15 years, it was revealed yesterday, but rates for remortgaging customers are typically lower.
Bradley Fordham, mortgage director at Santander, said borrowers face an average £350 a month increase if they move off their existing fixed rate deals. “In this environment you would expect more customers to have some financial difficulty,” he said.
Andrew Assam, homes director at Lloyds, said higher rates and caution around customers’ affordability were already dampening lending.
He told the MPs: “We won’t lend people as much as we would have done historically because rates are much higher.”
Halifax and Lloyds have forecast a five per cent fall in house prices this year as mortgages make purchases less affordable.
Despite growing concerns about the cost of living crisis, the banks said that they were still seeing a low level of customer arrears and defaults.
The Government has set out a mortgage charter which allows struggling owners to switch to an interest-only deal for six months, or extend their loan terms.
However, Mr Jordan advised customers to take these options only if they need to — because there will be a long-term cost.
Pawn sales up
CASH-strapped Brits are pawning more of their gold and jewellery in the latest sign of how the cost of living crisis is impacting households.
Pawnbroker H&T said customers were flogging their goods to raise extra cash, driving its lending sales up by 22 per cent.
H&T boss Chris Gillespie said it was seeing “growing momentum” and expected a “busy second half of the year”.
Pawnbrokers tend to do well during downturns as people start trying different ways to afford bills.
Postie pay deal
ALMOST three-quarters of postal union workers have voted in favour of the Royal Mail’s turnaround plan, ending the threat of more strikes.
In April, Royal Mail agreed a pay deal with the Communication Workers Union after 18 strikes last year which the company said cost it £11million per day.
The agreement means a 10 per cent salary bump for posties and a one-off £500 lump sum for 120,000 workers.
In exchange, workers will have later start times and longer shifts at seasonal peaks.
‘Zombie firms’ to face end
STRUGGLING “zombie firms” that have limped on for the last few years risk being killed off by higher interest rates, a restructuring firm has warned.
Ric Traynor, boss of Begbies Traynor, yesterday said that over the next 18 months “we’ll see virtually all of them finally come to an end”.
Zombie firms is the nickname given to companies that have been artificially kept alive either through low interest rates, Covid support schemes or business rates holidays.
Now government support has been wound up, businesses are also grappling with much higher debt costs.
A tougher consumer environment and a dip in earnings will likely be the nail in the coffin for many of these companies, experts warn.
That challenging backdrop isn’t bad news for some “ambulance chasing” insolvency firms though.
Begbies Traynor has grown sales by 11 per cent and says it has made a fifth more from working on insolvencies.
Activist row no2
THE owner of Wagamama and Frankie & Benny’s has come under fresh fire from another activist investor calling for a shake-up of the boardroom.
Irenic Capital Management, which has a 3 per cent stake, wants The Restaurant Group’s chairman Ken Hanna to step down.
The move comes after boss Andy Hornby has been locked in a year-long battle with activist Oasis Management over his pay and governance.
‘Big Tech’ AI curb
THE City watchdog will announce today that it will regulate “Big Tech” firms such as Google, Microsoft, Meta, Apple and Amazon amid fears that their advances in AI could give them an advantage over British financial firms.
Nikhil Rathi, boss of the Financial Conduct Authority, will say in a speech that Big Tech’s role as the “gatekeepers of data” will be under increased scrutiny.
The regulator is setting out steps to find out whether their troves of customer data, combined with the potential of artificial intelligence, could disrupt competition.
Apple already has Apple Pay while Microsoft has launched insurance products.
It’s so in fashion
FASHION brand Sosandar has enjoyed a 44 per cent jump in sales after selling more outfits through the websites of Next and Marks & Spencer.
The firm, set up by ex-magazine editors Ali Hall and Julie Lavington, saw sales hit £42.5million. The firm also celebrated its first full year of profitability, making £1.6million.
It has 264,832 customers who order more than twice a year. An international website for overseas orders launches this month.