Big big banks are raising mortgage rates starting TODAY – see the full list
ANOTHER three lenders have increased their mortgage interest rates, a bitter blow for starters and people who have to take out a new mortgage.
HSBC, NatWest and Virgin Money closed several deals overnight and increased their fixed rates this morning.
It’s the latest wave of lenders making cheaper deals only to come back with higher rates.
It means that five-year mortgage agreements will no longer be offered with rates below 4%.
It comes after Santander, Coventry Building Society and TSB all increased rates on new fixed deals earlier this week.
The lowest five-year fix for buyers and remortgages is now offered by First Direct at 4.04%.
Across all deposit sizes, the average two-year mortgage rate for homeowners in the market reached 5.70% on Tuesday, Moneyfacts said.
And the average five-year mortgage rate for homeowners was 5.28% on Tuesday.
Why do lenders increase mortgage interest rates?
David Hollingworth, associate director at L&C Mortgages, said: “There has been a lot of price activity, with lenders regularly adjusting rates to adjust for the fact that markets are now anticipating that base rates may take longer to fall than was previously hoped.”
The decision-makers of the Bank of England’s Monetary Policy Committee (MPC) voted in early February to maintain interest rates at 5.25% for the fourth time in a row.
At the start of the year, markets forecast four rate cuts in 2024, which would have taken the Bank’s rate to 3.75% by Christmas.
However, investors now expect the first rate cuts to begin in September.
David added: “This has led to fixed interest rates rising again as borrowing costs have risen, leaving HSBC the last lender to remain below 4%.
“That could surprise some borrowers, as the interest rate story this year has generally been declining rates.”
How will a higher mortgage interest rate affect my payments?
HIGHER mortgage interest rates mean that monthly repayments are higher.
Just over two years ago you could get a two-year fixed rate mortgage for 0.99%.
On a £100,000 mortgage taken out over 25 years, this would have meant a monthly repayment of £376.
If you were to borrow €100,000 today over the same term at the average two-year fixed rate of 5.28%, your monthly repayments would be €601.
That’s an extra £225 a month and it’s forcing borrowers into longer deals.
What does it mean for mortgage holders?
Lenders are currently mainly increasing their fixed mortgage deals instead of their standard variable and tracker deals.
About 1.6 million households currently have a fixed mortgage agreement, which expires later this year.
This means more than a million households are facing the prospect of increasing their monthly payments by hundreds of pounds.
And for 420,000 of these households, their permanent contracts expire between March and May.
How to get the best deal on your mortgage
If you’re looking for a traditional mortgage type, getting the best rates depends entirely on what’s out there available at any time.
But there are several ways to get the best deal.
Typically, the larger the down payment, the lower the interest rate you can get.
If you take out a new mortgage and your Loan-to-Value ratio (LTV) has changed, you will have access to better rates than before.
Your LTV decreases if your outstanding mortgage is lower and/or the value of your home is higher.
A change in your credit score or a better salary can also help you access better rates.
And if you’re nearing the end of a standing deal soon, it’s worth looking for new deals now.
You can sometimes lock in current deals up to six months before your current deal expires.
If you leave a fixed deal early, you’ll typically be charged an exit fee, so you’ll want to avoid these additional fees.
But depending on the cost and how much you can save by switching or staying, it may be worth leaving the deal, but compare the costs first.
Use one to find the best deal Mortgage comparison tool to see what’s available.
You can also contact a mortgage broker who can compare a much wider range of offers for you.
Some charge an additional fee, but there are plenty who provide free advice and are paid only on the lender’s commission.
You will also need to consider mortgage costs, although some may not have any costs at all.
You can add the costs (sometimes more than € 1,000) to the costs of the mortgage, but keep in mind that you will pay interest on it and will therefore cost more in the long term.
You can use a mortgage calculator to see how much you can borrow.
Please note that you will also need to meet the lender’s strict criteria, including affordability checks and viewing your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three months’ pay slips, passports and bank statements.