Any relief that homeowners were feeling as mortgage rates dropped gradually over recent months has been short-lived, as rates are on the up again in the wake of further economic turbulence.
The global financial crisis has taken another turn for the worst in the last few weeks, pushing up the Libor – the rate at which banks lend to each other – to six per cent, which in turn has been passed onto the borrower.
This week has seen rates rises from three of the UK's biggest mortgage
lenders, HSBC, Woolwich and First Direct, and others are expected to follow suit. The average mortgage costs £500 more today than it did two weeks ago, according to calculations from the Times.
"Last week's unprecedented worldwide financial crisis led to an immediate jump in LIBOR as liquidity reduced and banks became increasingly reluctant to lend to each other." commented Louise Cuming, head of mortgages at price comparison site moneysupermarket.com. "It has taken only a matter of days for the impact of this to feed through to new borrowers - with a double whammy of higher interest rates and tighter lending requirements."
While she continues to say that the mortgage market in the UK has not completely closed, Ms Cumming is clear that for many homeowners it might as well be. She added "it isn't stretching the point too far to say is only open to people with impeccable credit records and a deposit of 25 per cent or more."
Meanwhile, as mortgage rates rise again, house prices have been falling by an average of almost £45 a day since the beginning of the year, according to new figures released by property valuation website Zoopla.co.uk
, wiping a total £1.25billion a day off the UK housing market.
"It is clear from our latest figures that the recent drop in home values has not reversed course in recent weeks" said Alex Chesterman, CEO of Zoopla, of the results.
Previous to the most recent knock to the global economy, there was some light at the end of the tunnel – house prices weren't falling as fast as they had been, and several mortgage lenders were bringing their rates down, but any good that was done has been rapidly reversed.
Ms Cumming concluded: "All in all, a grim week in the mortgage market which has undoubtedly quashed earlier shoots of optimism that were starting to show."
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