FAST FIVE: The Other Reason The BOE Panicked: 26% Of All UK Mortgages Are Variable Rate And Set For Imminent Repricing
So at these levels, this would send affordability to worse levels than that seen during the GFC and within a couple of percentage points of the peak in the late 1980s/early 90s when the UK saw a savage house price crash.
The report (available to pro subscribers ) also shows that in aggregate, we're already around those levels for London.
However, unlike the US where a 30-year fixed market dominates, the FCA suggested in August that 26% of the total outstanding UK mortgages are variable rate and thus dependent on where the BoE's bank rate is.
It is currently 2.25% but markets are now pricing in a terminal rate above 6% which would be a huge shock if it got close to happening over the next 6-9 months as is priced in.
As Reid concludes, while much can change very quickly in politics and markets, if markets are correct, “the UK housing market is in for a huge amount of pain ahead,” unless the BOE were to somehow monetize all the upcoming debt issuance and sends rates back to zero.