Brokers brace for rate rises of up to 1% if Greece leaves eurozone

Brokers fear mortgage rates could rise by up to 1% if Greece leaves the euro.

Greece is set to hold its second elections in under two months on June 17, the result of which is likely to decide if it stays in the single currency.

Last week Capital Economics predicted a Greek exit could push rates up by around 1%.

The price of UK mortgages has increased steadily since autumn 2011, when rates dropped to their lowest recorded levels despite Libor falling from a high of 1.09% in February to 1% currently and the base rate staying at 0.5%.

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

David Hollingworth, mortgage specialist at London & Country, 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% hike in rates is feasible.”

Mike Fitzgerald, group sales and marketing director at Emba Group, 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%.”

But Ray Boulger, senior technical manager at John Charcol, 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.”