UK finance minister meets banks over soaring mortgage rates

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British Finance Minister Kwasi Kwarteng on Thursday met UK banks to discuss mortgage interest rates that are soaring following his heavily-criticized budget.

The chancellor of the exchequer held talks with some of the country’s biggest home loan providers, the Treasury said, amid the nation’s worsening cost-of-living crisis.

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Average two-year fixed mortgage rates have topped six percent for the first time since November 2008, or global financial crisis, according to data provider Moneyfacts.

The average rate fixed for five years has also breached six percent, for the first time since 2010.

British home-loan providers usually offer mortgages with a fixed interest rate for a set time period -- typically two to five years -- but then the rate becomes variable or a new rate is fixed in line with market conditions.

Average UK home-loan interest rates had for some time hovered near two percent for a fix of between two and five years.

But they are now soaring after the Bank of England hinted at aggressive interest-rate hikes following the budget seen as adding to rocketing inflation.

In less than a year, the BoE has already lifted its main interest rate to 2.25 percent from a record-low 0.1 percent aimed at cooling historically high prices.

The situation has massively pushed up monthly mortgage repayments for households already struggling with sky-high energy bills.

New Conservative Prime Minister Liz Truss hopes her new government’s budget, including a energy-price freeze and tax cuts, will boost Britain’s recession-threatened economy.

Financial markets, however, are unconvinced over how the costly package would be funded.

Truss on Wednesday vowed to steer Britain towards growth as she closed her ruling Conservative party’s tumultuous annual conference.

But the British pound promptly collapsed two percent against the dollar.

In another blow, Fitch lowered the outlook on its credit rating for UK state debt to negative from stable, blaming the impact of the “large and unfunded fiscal package.”

The government’s 30-year bond yield on Thursday stood at 4.31 percent, off a 24-year peak of above five percent seen last week. The pound has meanwhile recovered from a record-dollar low at the end of September.

Read more: Weakened Truss pledges to steer Britain through ‘stormy days’

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