UK Market Turbulence Pushes Mortgage Costs to Five-Month High

The cost of the UK’s most popular mortgages have risen to their highest level since August as the turbulence that’s gripped the government debt market feeds through into the cost of borrowing for home buyers. 

Five-year fixed rate mortgages hit 5.3% Friday, the highest in five months, data compiled by Moneyfacts show. That’s squeezing borrowers and threatens to stall a market recovery that started to take hold as the Bank of England began cutting rates last summer. 

UK government borrowing costs had been climbing steadily in the aftermath of the government’s tax-hiking budget and anemic growth forecasts, as well as marketwide pressure on government bond prices. The run-up in gilt yields accelerated at the start of this year as traders priced in data indicating stickier inflation, though Chancellor Rachel Reeves won a slight reprieve this week as the latest numbers on jobs and costs showed signs of cooling.

Fierce competition in the mortgage market had shielded consumers to some extent from the renewed fears around persistent inflation and expectations that rates will stay higher for longer. Five-year borrowing costs had dropped below 5.1% in the aftermath of the August rate cut and they’ve been slow to adjust to the run up in gilt yields since. 

Homebuilders including Persimmon Plc and Taylor Wimpey Plc beat estimates this week as they reported sales rates that were recovering from the shock brought about by higher rates. But the market remains beset by uncertainty, with mortgage costs and affordability a key consideration, Taylor Wimpey Chief Executive Officer Jennie Daly said.

With assistance from Andrew Atkinson.

This article was generated from an automated news agency feed without modifications to text.