Martin Lewis issues mortgage warning to house buyers as interest rates set to be highest in 30 years

Martin Lewis has urged home buyers to be aware of interest rates as they are expected to rise up to 6% next year – the highest in 30 years.

The finance guru suggested first time buyers should not buy a house now unless they are fully prepared and plan to live in it long term.

Mr Lewis appeared on Good Morning Britain on Monday (3 October) to answer questions about the property market amid concerns over interest rates and said it is difficult to be sure what will happen with the housing market because we are "working with so many variables" and "no firm answers".

However, the Money Saving Expert founder said there are warning signs, including the removal of hundreds of mortgage offers from the market last week and entions of possible 30-year high in mortgage costs.

He said on the breakfast show: “If you’ve got a decent deposit, and you’ve found a house that you love, and you’ve got a mortgage that is affordable for you, and you’re going to stay in that property for a long time, get on with it, buy your house.

"If you’re doing this because ‘this isn’t the house that I want but I feel I should do it before everything goes wrong and it all goes belly up’ – don’t buy your house."

He added: "There are no firm right answers and I apologise if we play this back in two years time and I was totally wrong, that’s possible.”

Why are there concerns over interest rates?

The current Bank of England base interest rate rose in September and currently remains at 2.25%, but there is an uncertainty over where rates are headed.

Economists have further predicted a potential 15% drop in house prices and lenders have stopped their deals as they were unsure how to price them amid the unpredictable climate.

The base rate affects how much banks charge for borrowing including mortgages, credit cards and loans. People could soon find it harder to buy a home if borrowing rates rise and house prices are hit.

Almost 300 mortgage products were pulled from the market overnight last week as a top Bank of England official warned millions of borrowers to brace themselves.

Huw Pill urged borrowers to prepare for a “significant” rate hike after lenders Santander and HSBC, along with the Nationwide and Yorkshire building societies, joined a rush of lenders to pull home loans or up their rates. Buyers have been left chasing a dwindling number of home loans.

What other concerns are there?

There has also been speculation the Bank of England will unleash more big rate rises to prop up the pound. It comes after the pound plunged in the wake of Kwasi Kwarteng’s mini-budget.

The Chancellor has since admitted that £45bn in tax cuts funded by borrowing, as part of his budget, had been done “at very high speed”, but he was convinced it was the right plan.

In another recent U-turn, the government deleted a tweet on stamp duty claiming that a first time buyer in London moving into a terraced house will save £11,250 on stamp duty and £1,050 on the household energy bills.

Mr Lewis demanded the government delete the "nonsense" tweet, as he publicly disproved its content. Responding to it on Twitter, he said to his followers “this is nonsense.”

He wrote: “To make that stamp duty saving you’d need to be buying a £500,000+ property.

“With 10 per cent deposit, cheapest fix mortgage would cost £2,400/mth (£28,000/yr). How can someone on £30k afford that?"