New home loans in Northern Ireland now £190 dearer per month after interest rate hike

The latest Bank of England interest rate hike means new home loans are around £190 dearer per month in Northern Ireland compared to the start of the year, an economist has said.

he hike to 2.25% increases the cost of living for many of us by making mortgages and other borrowings more expensive.

But the Bank of England regards it as necessary to control soaring prices — reflected in inflation of 9.9% — by curbing spending. The Bank also indicated that it believes the UK economy is already in recession.

It will have a direct impact on the housing market in Northern Ireland by making mortgages for first-time buyers or people who are re-mortgaging to a new rate more expensive.

It has an immediate impact on homeowners on tracker or variable rates, which go up or down according to Bank of England decisions. It’s estimated that one third of NI mortgage holders are on tracker or variable deals, around 85,000 people.  

Ulster University economist Dr Esmond Birnie said such householders would now be “hurt” by the increase, and would be spending an extra £30 a month.

But the financial blow is much greater for anyone who is changing to a new mortgage deal or borrowing to buy a new home. Jordan Buchanan, chief economist at property website, said: “Further interest rate increases were largely expected and many lenders had already priced in higher mortgage rates in recent days.

“Whilst the Government is putting in place measures to reduce inflationary pressures in the short term, the Bank of England look set at continuing their approach with further interest rate rises expected in the coming months.

“Rising interest rates will benefit savers, but it won’t help new housing market activity as borrowing becomes more expensive and anyone currently re-mortgaging their property or new to the market will experience the impact of this on their monthly repayments.”

He said that based on the average two-year fixed rate mortgage across all lenders, where a borrower had a 10% deposit, a monthly loan repayment would now be £190 higher compared to the start of the year as a result of interest rate increases.

“At the start of 2022, typical mortgage rates were under 2.0%, which on a median priced home of £145,000 in Northern Ireland meant monthly repayments of approximately £480 per month, over a 30 year term.

“Fast forward to today and the median price is £155,000 with a typical mortgage rate of 4.0%, equivalent to £670 per month, a significantly higher £190 per month.

“Whilst the economic outlook remains highly uncertain and volatile, the governments are moving at pace to try and stabilise matters. However, financial markets aren’t convinced and are expecting interest rates to rise considerably higher in the next six months, meaning further hikes in mortgage rates and further pressure on buyers affordability.”

But Conor Mulligan, chief executive of house builder Lagan Homes, said that even with the latest rise, owning a house was still a cheaper option than renting. And he said people who were buying new houses were still saving themselves large sums as the cost of heating a new house was around 50% less than a typical 40 year-old property. 

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