Mortgage rates for first-time buyers have rocketed in the wake of the Covid crisis, dealing a major blow to Boris Johnson as he promises to get a generation of young people on to the housing ladder.
“Alarming” figures from the Bank of England show that borrowers with a small deposit are being billed an extra £100 a month on average as banks hike their interest charges to guard against the risk of a market crash.
The Bank’s mortgage data is likely to spark fresh fears that millions of families have been condemned to long-term renting by risk-averse banks and sky-high property prices, which hit an average of £250,000 last month, a record high, according to Halifax.
It also underlines the urgency of the Prime Minister’s pledge to help would-be buyers. Mr Johnson is considering using a controversial state guarantee to support riskier loans so banks are more willing to lend. Critics say it will push up prices.
Threadneedle Street’s figures showed the average cost of a two-year, fixed-rate deal for borrowers with a 5pc deposit jumped to a two-year high of 3.95pc in September, sharply up from 3.02pc in February.
Financial data firm Moneyfacts said the price hike meant buyers taking out a typical £200,000 mortgage would pay an extra £99.61 a month compared to before the pandemic in February, or £2,391 over the two years of the deal.
Mortgages are becoming dearer for all borrowers despite the Bank slashing interest rates to an all-time low of 0.1pc in March, as banks are spooked by a potential surge in unemployment.