More mortgage providers are set to raise their rates on new fixed deals this Friday, following a series of changes since the start of the year. While January saw lenders cutting their rates significantly, higher costs faced by providers to fund mortgage lending have led many to increase rates again recently. HSBC, NatWest, and Virgin Money are all set to increase the cost of new deals, marking the end of widely available five-year fixed deals with a rate of less than 4%.
David Hollingworth from broker London and Country noted that this may surprise some borrowers given the trend of falling rates this year. He explained that lenders have been adjusting rates in response to investors’ expectations of fewer and later changes in the Bank of England’s base rate of 5.25% this year.
The interest rate on a fixed mortgage remains unchanged until the deal expires, typically after two or five years. If no new deal is chosen, borrowers would be left on a variable rate, which can be costly. Approximately 1.6 million existing borrowers have relatively inexpensive fixed-rate deals expiring this year.
Earlier this week, Santander, Coventry Building Society, and TSB all raised rates on new fixed deals. Despite these increases, Aaron Strutt of mortgage broker Trinity Financial noted that deals are still reasonably priced. However, he warned that if rate hikes continue, they could impact the property sector.
Andrew Montlake, managing director of Coreco mortgage brokers, highlighted the challenges these sudden rate increases pose for those seeking a new mortgage. He warned that quick decisions or revised budgets may be necessary, which could potentially affect people’s ability to secure their dream home.
However, there are indications that lenders are struggling to determine where rates should be set. Halifax, part of Lloyds Banking Group, is reducing the rates on some of its deals this Friday. Hollingworth anticipates further movement in mortgage rates as the market remains highly competitive.
