Understanding the mortgage crisis - Expert insights from the CEO of My Community Finance
In a span of three years, approximately half of mortgage holders in the UK have transitioned from repaying less than £1,000 monthly to exceeding that threshold due to surging housing costs and escalating interest rates.
In the southern regions of England, repayments have more than doubled. The average monthly mortgage repayment, which was £565.38 in July 2020, has surged to £1,142.36 in June 2023.
Presently, the average two-year fixed rate stands at 6.83%, while the average rate for a five-year fixed rate mortgage clocks in at 6.34%.
Mortgage rates have witnessed a significant upswing in the past two months following underwhelming inflation figures, which heightened the possibility of additional Bank of England base rate hikes.
Consequently, swap rates—representative of the bank borrowing rates that offer insights into projected fixed-rate mortgage costs in two to five years—have been on the rise.
However, a dose of optimism returned to the market thanks to inflation data from June surpassing expectations. As a result, swap rates are now receding, leading to some high street lenders like HSBC and Nationwide lowering the rates on their fixed mortgages.
Talking about how long the mortgage crisis might last, founder and CEO of My Community Finance, Tobias Gruber, said:
"The Bank of England keeps increasing the base rate to try and bring down high inflation, which is currently at 8.7% - above the target of 2%.
"According to financial markets, there's a one in three chance that the base rate could reach 6% by the end of 2023 - a staggering prospect for homeowners coming to the end of their fixed-rate deals.
"Without a crystal ball, it's very difficult to predict precisely how long it will take for interest rates to fall to the levels we enjoyed two years ago because many factors influence them, like world events and currency exchange rates.
"It will likely take a few years for interest rates to come down, so people who borrow money should expect to pay more interest for the foreseeable future".
About Tobias Gruber
Tobias Gruber is the founder and CEO of My Community Finance. For the past 30 years, he's been a prominent leader in investment banking and asset management for some of the sector's most renowned banks, including Credit Suisse, SwissBank, JP Morgan and Morgan Stanley.
Fast forward to 2018, Tobias launched My Community Finance to provide a platform for the financially excluded, helping people to get back on their feet with ethical and socially responsible lending. Within 36 months, My Community Finance has become accountable for 25% of borrowing within the credit union sector.
Tobias has experienced first-hand how certain areas of the finance world are ripe for change and is a passionate advocate for using fintech to help people and solve society's economic problems.
About My Community Finance
My Community Finance is on a mission to transform how its customers manage their money by giving them access to ethical alternatives through two of the U.K.'s biggest credit unions: My Community Bank and Castle Community Bank.
Credit unions give a lifeline to customers who struggle to access mainstream credit by introducing them to financial communities that don't prioritise profits and whose unique regulatory structure means they can offer fairer rates.
Based in London and launched in 2018, My Community Finance is fully authorised and regulated by the Financial Conduct Authority and is a trading name of Amplifi Capital (U.K.) Limited, which has offered ethical and responsible financial products to near-prime consumers since 2015.
