Now banks pile on the agony with ‘double’ rate rises

MORTGAGE lenders have come under fire for hiking the price of fixed deals by up to double the latest interest rate rise.

The Bank of England increased the base rate from 1 per cent to 1.25 per cent on Thursday in an attempt to halt spiralling inflation.

It was the fifth consecutive rise in six months, pushing rates to a 13-year high.

A senior Bank official warned it was prepared to impose more aggressive rate rises if prices continued to surge after admitting it had ‘underestimated’ inflation.

This would mean more bad news for borrowers who have seen a significant jump in the cost of new mortgage deals.

In just two days, around 20 lenders have hiked rates or pulled deals altogether, according to research by broker L&C Mortgages.

Some even increased their prices ahead of the latest Bank of England announcement.

All of HSBC’s fixed deals rose by 0.45 or 0.5 percentage points on Thursday, the third time in ten days the bank has changed its rates.

NatWest also increased the price of fixed rate deals by up to 0.27 points, and Nationwide by up to 0.4 points yesterday.

Other offers are disappearing altogether while lenders catch up with an influx of applications from borrowers desperate to shield themselves against further rate rises.

David Hollingworth, of L&C Mortgages, said: ‘Rate increases have been a daily occurrence throughout this year and this only seems to accelerate. There will undoubtedly be more to come in the next weeks and months.’

HSBC said the increase ‘was not in anticipation of the Bank of England base rate decision’. Fixed deals are priced based on swap rates – what banks charge each other to borrow money – and these have risen sharply in the past month.

This in turn has pushed up prices for mortgage customers. The average two-year fixed deal is now 3.25 per cent, compared to 2.34 per cent in December, according to data analysts Moneyfacts.

Typical five-year rates have risen from 2.64 per cent to 3.37 per cent.

But experts warned that mortgage rates will increase yet further, with base rate predicted to rise as high as 3.5 per cent by the end of next year.

Huw Pill, the Bank of England’s chief economist, said it was prepared to act ‘forcefully’ to tame inflation, which is predicted to rise to more than 11 per cent by October after hitting 9 per cent last month, its highest level in 40 years.

Many analysts had predicted a sharper interest rate increase of 0.5 percentage points on Thursday, sparking criticism that Bank of England Governor Andrew Bailey was behind the curve when it came to reining in rising prices.

‘There’ll be more increases to come’