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Brokers fear mortgage rate rise in Greek exit

Brokers fear mortgage rates could rise by up to 1 per cent if Greece leaves the eurozone.

Greece is set to hold its second elections in under two months on June 17, the result of which is likely to decide if Greece stays in the single currency. This week, Capital Economics predicted a Greek exit could push rates up by around 1 per cent.

The price of UK mortgages has increased steadily since the autumn, when rates dropped to their lowest recorded levels despite Libor falling from a high of 1.09 per cent in February to 1 per cent currently and bank rate staying at a record low of 0.5 per cent.

The average two-year fixed rate has risen from 4.16 per cent last September to 4.66 per cent now, according to Moneyfacts.co.uk.

Industry experts feel the wholesale markets could freeze if Greece leaves the euro, resulting in tighter criteria and higher prices.

London & Country associate director of communications David Hollingworth says: “Things will get pretty bad if Greece exits the euro.

Rates are already increasing and I do not see how this trend will change if the single currency breaks up. I think a 1 per cent increase in mortgage rates is feasible.”

Emba group sales and marketing director Mike Fitzgerald says: “Mortgages will be harder to get and will become more expensive if Greece leaves the euro. I would not be surprised to see rates rise by more than 0.5 per cent.”

But John Charcol senior technical manager Ray Boulger says: “I think the change could be fairly modest in the short term – less than 50 basis points – as lenders have had about two years to prepare and price for this.”

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