Warning UK Mortgage Rates Set to Rise Further

Borrowers are being warned mortgage rates are set to rise further as turbulence continues to hit the market. David Hollingworth, of broker London & Country, said lenders had been withdrawing deals and raising rates at a “relentless pace” and this week “is going to bring more of the same”.

Mortgage rates have gone up about 0.5 percentage points in the last month to approach an average fixed deal of 6%.

It comes as 1.5 million households are set to come off fixed deals this year. Rates have been rising since recent data showed that UK inflation is not coming down as quickly as expected.

There have been predictions that the Bank of England will raise interest rates higher than previously thought, from their current 4.5% to as high as 5.5%. It has a direct impact on lenders, many of whom have raised rates and taken deals off the market over the last few weeks.

Last week HSBC became the latest big lender to pause new deals sold through brokers, but it temporarily reopened those offers on Friday.

Mr Hollingworth told BBC Radio 4’s Today programme: “It’s been pretty relentless for the last couple of weeks. We’re back to that phase of you can’t hang around if you are looking at a fixed rate.”

He said lenders were being forced to reprice deals as the market shifted around them and those with cheaper deals faced a “tidal wave” of business. “Unfortunately I think this week we may still have to see more of that happening. But hopefully those rates will just start to find a level and we’ll see things start to calm down in the near future.”

According to financial data firm Moneyfacts, the average two-year fixed-rate mortgage deal is 5.86%, while five-year deals have hit 5.51%.

Last May they were 3.03% and 3.17% respectively, meaning many households have seen sharp rises in their borrowing costs.

When a fixed term comes to an end then a borrower reverts automatically to their lender’s standard variable rate (SVR). But brokers say these SVRs have soared, meaning anyone who adopts a wait and see approach would see a massive jump in the rate they pay, and therefore a much higher monthly mortgage bill.

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