Mortgage Rates in England May Hit 14% Within Two Years

It would be the first time when mortgage rates reached this level since the recession in 90s. It can be the cause of the Bank of England interest rates, which are increasing sharply – up to 8%.

By adding the profit margins, lenders can push the rates offered to home owners to 12-14%, according to Moneyfacts.

The rates would be lower if current profit margins of 3.5 % were added to interest rates of 8%. But Moneyfacts argued that the margins charged by lenders would be higher because the risk of lending money at that level is much bigger.

Andrew Lilico, chief economist at the influential Policy Exchange, warned of an interest rate environment, which is not seen since the 1990s.

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He argued that the £200 billion of cash pumped into the economy by the Bank of England during the financial crisis would lead to “a huge expansion in the money supply, which will lead to inflation”.

At 14%, borrowers would pay £1,750 a month on an interest only mortgage of £150,000. It compares with a monthly mortgage payment of £313 for those with the same mortgage, but paying a rate of just 2.5%.

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