MPC member warns of rise in mortgage bills

The Bank of England’s expert on the property market has warned that many homeowners could experience a sudden rise in their mortgage bills during the next few months.

Kate Barker, who is also a member of the Monetary Policy Committee, gave an unusually downbeat speech, saying: “A prolongation of the present difficulties in accessing wholesale funds could restrict the quantity of mortgage lending during 2008. In this case, the mortgage market could become less competitive and more expensive.”

She added that this could lead to a vicious cycle in the property market, as more expensive mortgages could feed “back into a decline in the housing market, somewhat lower consumer spending and also into lenders’ balance sheets, reducing lending capacity further.”

This warning is especially significant as Ms Barker is the author of a series of government reports about the planning process and the housing market.

People whose mortgage terms expire in the coming months are most likely to be affected by a tightening in the credit market. Ms Barker said: “There is a risk that some less high quality borrowers reaching the end of two-year fixed-rate mortgages during 2008 may find they have to re-finance onto the much higher standard variable rate. The impact of this could be very significant for those households.”

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