UNITED KINGDOM — The Office for National Statistics has reported a remarkable surge in wages during the three months leading up to May. This development has fueled expectations of further interest rate hikes and has traders predicting that the Bank of England may raise borrowing costs to a 25-year peak by early next year. Consequently, average mortgage rates could surpass 7%.
Similar wage growth in June prompted lenders to swiftly withdraw deals, anticipating a prolonged period of elevated borrowing costs. The average five-year fixed deal currently stands at 6.17%, lower than its peak of 6.51% in October, indicating that lenders anticipate a return to lower base rates after two years.
However, critics argue that the absence of reforms proposed by former Prime Minister Liz Truss has hindered the economy's ability to cope with the consequences of higher interest rates and stagnant growth.
The impact is already being felt, with a £200,000 mortgage incurring £343 more in monthly repayments compared to a year ago. Furthermore, while borrowing costs have surged, savings rates continue to lag significantly behind, with the average easy access account yielding only 2.53%.
The pressure on house prices is becoming evident as well, with Halifax, the UK's largest lender, reporting the steepest annual decline in property prices since 2011. In June, house prices were 2.6% lower than the previous year. Yahoo News reports.
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