Lenders hike mortgages by double latest base rate rise
MORTGAGE lenders have come under fire for hiking the price of fixed deals by up to double the latest interest rate rise.
In an attempt to halt spiralling inflation, the Bank of England increased rates from 1 to 1.25 per cent – the fifth consecutive rise in six months – on Thursday.
A senior Bank official yesterday 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 already seen a jump in the cost of 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 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 morning, the third time in ten days the bank 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
‘Undoubtedly more increases to come’
influx of applications from borrowers desperate to shield themselves against further rate rises.
L&C’s David Hollingworth said: ‘Rate increases have been a daily occurrence throughout this year and this only seems to accelerate. There will undoubtedly be more to come.’
HSBC said the increase ‘was not in anticipation of the Bank of England base rate decision’ and that it regularly reviews its deals.
Fixed deals are priced based on swap rates – what banks charge each other to borrow money – which have risen sharply in the last month.
Experts warned that mortgage rates will almost certainly increase further, with base rate predicted to rise as high as 3.5 per cent by the end of next year.
Huw Pill, the Bank’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.