Mortgage rate fears for Northern Ireland homeowners amid financial turmoil

Those with a variable rate mortgage, particularly those tied to the rate set by the Bank of England – known as ‘tracker’ mortgages – would likely see an immediate increase in their monthly bills if the expected rate hike is introduced.

The majority of homeowners in Northern Ireland, however, are on fixed rate mortgages and would likely see the impact when the fixed term expires.

A series of lenders have already announced interest rate hikes or withdrawn their mortgage products entirely.

HSBC UK said it has removed its “new business” residential and buy-to-let products from sale, but all its products and rates for existing customers remain available.

The Bank of Ireland also said, in a statement to the BBC, that it will temporarily withdraw mortgage products.

The bank told the broadcaster it had withdrawn all residential and buy-to-let rates on Monday, but promised to launch new ranges as soon as possible.

Britain’s biggest building society, Nationwide, said that from today, it will increase its two, three, five and 10-year fixed-rates by between 0.9 and 1.2 percentage points.

Following the turmoil in the markets on Monday, the chancellor sought to reassure City investors yesterday that he has a “credible plan” to start reducing the UK’s debt mountain.

However, the Bank of England’s chief economist Huw Pill warned they “cannot be indifferent” to the developments of the past days – seen as a signal the cost of borrowing will have to go up to protect the pound and keep a lid on inflation.

“It is hard not to draw the conclusion that all this will require significant monetary policy response,” Mr Pill said in a speech to the Barclays-CEPR International Monetary Policy Forum.

“We must be confident in the stability of the UK’s economic framework.”

After two days of big changes, the pound settled down yesterday, trading at around 1.08 dollars for most of the day, deviating only briefly with a two cent drop.

In Northern Ireland, Dr Birnie said an increase in the interest rate would be “bad news for borrowers”.

Speaking to the News Letter, he added: “It would add to the pain that we’ve already seen. As of last Thursday, we had seen the rise to 2.25% and I think there is a likelihood the Bank of England will now – in a sense – be forced to accelerate the further upward steps in the interest rate, which were probably going to happen anyway but the point is they are probably going to be brought forward in time.

“There will be more of them, they will happen sooner, and they will be larger.”

DUP MP Sammy Wilson, who last week gave a cautious welcome to some of the measures set out by the chancellor, suggested the economic turmoil that has followed the so-called ‘mini-budget’ has been “hyped”.

“The change in the value of the pound has been hyped to a certain extent,” he said.

“The markets are fluctuating a lot at the moment and, quite frankly, a lot of the bankers like fluctuating markets because they can make a lot of money.

“The reaction that there has been to the government’s plans has been, in my view, an overreaction.”

On the likelihood of increased housing costs for mortgage holders, Mr Wilson said: “The one thing that would worry me is that the Bank of England does have to do something about inflation.

“Part of the reason for the strength of the American dollar at the minute is that the Americans have decided to stuff homeowners, to stuff people who had taken out loans, and put up the rate of interest.”

He continued: “I’m fairly sure the Bank of England are going to look again at interest rates, and that is going to have an impact on people with mortgages.

“Already, some of the building societies and banks are withdrawing some of their cheaper products in the expectation that the Bank of England will raise interest rates.

“That will hit a lot of people who bought homes and probably stretched themselves a wee bit because the interest rate was very low. They could find themselves stuck with heavier housing costs.”

However, the East Antrim MP added: “We are going to have higher interest rates, and there is a need to have higher interest rates because we need to encourage people to save as well.

“Savers have been very badly hit by the very low interest rates.”