Shocking Truth: Astonishing Rise in Mortgage Costs Worldwide Compared to UK | Don’t Miss Out on This Mortgage Revelation!

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Borrowers are protected from long-term loan shocks in the US and the paternalistic approach in Europe

The huge increases in monthly mortgage costs Brits face “just don’t happen here,” says Roger Bartlett, who bought a house in Belgium while working in the country as an air traffic controller.

He says his experience was the same in the Netherlands, where 30-year mortgages are the most common loans used by homebuyers.

The rapid increase in mortgage rates in the UK: the average two-year fixed deal has reached 6% for the first time this year – has raised questions about how the UK home loan market compares to that of foreign nations as interest rates rise around the world. A picture of a comparatively short-term and highly competitive UK industry quickly emerges.

Bartlett’s first mortgage had an interest rate of 9%, but when new mortgages began to be offered at rates close to 4% a few years later, he paid a fee, equal to three months of payments, to transfer to the lower rate. .

“The benefit for the client is that they can plan their expenses for the entire period. And for society it brings stability to the market, since most lenders are not affected by rate changes, ”he adds.

Variable mortgages are offered, but the rate is only 0.5% lower, he says, making it a great gamble for a small profit.

Your daughter recently moved to Belgium from the UK and bought a house with a 20-year mortgage set at 1.49%.

As in the Netherlands, there is a strong paternalistic element to home lending in France that allows homebuyers to take advantage of a 30-year fixed-rate loan.

If the mortgage payer moves home, there are no prepayment penalties. And if someone loses their job or falls ill, the lender is expected to be lenient, says Miranda John, director of international real estate finance at broker SPF Private Clients.

The central bank protects borrowers from the ups and downs of the financial markets, at least from their weekly mood swings, by issuing an average percentage rate (APR) that banks must use as the basis for their loans.

A state-influenced mortgage market might have the advantage of allowing borrowers to adjust to higher loan rates over a longer period of time, but it means that in a period of rapidly rising borrowing costs, the lag between what banks can offer and what they must pay themselves to borrow in international markets is reduced. The average 30-year mortgage rate in France is still 3.5%.

John says that French borrowers could, in theory, be enjoying much lower borrowing costs than their UK counterparts, but the reality is that most banks are not lending because their spreads are shrinking as that they would be losing

“The central bank introduced a standard APR as a consumer protection measure, but it has stalled the whole market now that ordinary mortgages aren’t profitable,” he says.

Culturally, it means the French system is a world away from the UK mortgage market, which has roughly twice as many lenders competing for business and many times more products on offer.

In the US, a longer-term approach to mortgages has prevented households from facing an immediate jump in borrowing costs. While steep interest rate increases and political instability have shaken the mortgage market, the popularity of mortgages that lock in for the full term of 15 or 30 years has protected homeowners.

The average mortgage term in the US is 23.3 years and shows no signs of slowing down in response to rising rates. A similar level of flexibility applied by mainland banks is offered to buyers in the United States should their circumstances change.

The lowest rate for a 30-year mortgage in the US is around 5.7%.

In the UK, mortgage lenders are also encouraged to buy short by a financial industry populated by many more brokers than can be found in France and the standard rules that allow mortgage companies to apply early surrender charges to those who want to redeem a long-term loan. term fixed rate product.

Financial stability is another hurdle UK mortgage lenders must overcome, says Neal Hudson, founder of consultancy Residential Analysts and a visiting fellow at Henley Business School.

“Financial markets are paying attention to the UK data at the moment and it’s turning out to be disappointing,” he says.

Official figures on Wednesday are expected to show only a modest drop in inflation in May, making the Bank of England look set to raise interest rates for the 13th time in a row to 4.75% when its policymakers meet. Thursday.

However, fixed-rate mortgages are tied to the government debt market. The interest rate on government debt, known as the yield, spiked last year by the wake of Kwasi Kwarteng’s unfortunate budget and has returned to high levels in recent weeks.

Financial markets have judged that the UK’s recovery from the pandemic and inflation crisis will take longer than many other countries, leading analysts to believe that mortgage rates will stay at current levels well into 2024.

France and the rest of the 20 countries within the eurozone face rising borrowing costs after a series of rate hikes by the European Central Bank, but the stability of the currency zone means that the interest rate on public debt will remains below that of the United Kingdom.

Portugal is an outlier. It has the highest effective mortgage interest rates, which is a measure of all mortgages and the interest bill paid, mainly because most home buyers buy variable rate products.

Ray Boulger, mortgage adviser for broker John Charcol, says niche lender Kensington mortgages plans to launch a 30-year fixed rate mortgage in the UK at 5.65% later this year. Like its French counterparts, it won’t charge an early refund fee for changing your address. Hope it catches on.

“About 40% of mortgage buyers went for variable-rate mortgages in Q4 2022. They’re going to be having a rough time,” he says.