HomeWorldNew home loans in Northern Ireland now £190 more expensive per month...

New home loans in Northern Ireland now £190 more expensive per month after interest rate hikeSEDI News

- Advertisement -

A recent Bank of England interest rate hike means new home loans in Northern Ireland are around £190 a month more expensive than at the start of the year, an economist has said.

That increase to 2.25% raises the cost of living for many of us by making mortgages and other borrowing more expensive.

But the Bank of England sees it as necessary to control rising prices – reflected in inflation of 9.9% – by reining in spending. The bank also signaled that it believes the UK economy is already in recession.

It will have a direct impact on Northern Ireland’s housing market by making mortgages for first-time buyers or people who remortgage at a more expensive new rate.

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

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

But the financial blow is in store for anyone switching to a new mortgage deal or borrowing to buy a new home. Jordan Buchanan, chief economist at property website PropertyPal.com, said: “Further interest rate rises were widely expected and many lenders had already priced in higher mortgage rates in recent days.

“While the government is taking steps to reduce inflationary pressures in the short term, the Bank of England is set to continue its approach with further interest rate hikes expected in the coming months.

“Rising interest rates will benefit savers, but will not help new housing market activity as borrowing becomes more expensive and anyone currently re-mortgaging their property or new to the market will feel the impact on their monthly payments.”

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

“At the start of 2022, typical mortgage rates were below 2.0%, which would mean a monthly payment of around £480 over a 30-year term on a home worth £145,000 in Northern Ireland.

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

“While the economic outlook remains highly uncertain and volatile, governments are moving quickly to stabilize and stabilize things. However, financial markets are not convinced and are expecting a significant rise in interest rates over the next six months, which means Further increases in mortgage rates and further pressure on buyers’ affordability.”

But Conor Mulligan, chief executive of housebuilder Lagan Homes, said that even with the recent boom, home ownership was still a cheaper option than renting. And he said people who were buying new homes were still saving big because heating costs in a new home were about 50% lower than a typical 40-year-old property.