Capital Economics: Surprised by mortgage rate rises

The extent to which mortgage providers have raised rates recently is surprising, according to one UK economist.

Paul Dales of Capital Economics stated: “I have been quite surprised at how marked the rises in mortgage lenders’ rates have been, how widespread it has been and how many lenders have had to pull different mortgages.”

Last week, the Bank of England’s monetary policy committee announced a 25 quarter-point cut in the base rate to five per cent, resulting in widespread criticism that the reduction was not large enough.

However, Mr Dales remarked that the Bank is trying to do a balancing act with inflation and therefore just a small cut is necessary.

Commenting on many banks and mortgage providers decision not to pass on the reduction, he explained that lenders are being subjected to higher funding costs within the wholesale market.

Mr Dales said that he did not think banks were holding back simply to maximise profits.

© Adfero Ltd

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