Lenders pass on double the Bank Rate rise to borrowers

Banks have rushed to pass on higher borrowing costs to homeowners, in some cases increasing the cost of loans by double the rise in the Bank Rate announced by the Bank of England last week.

Halifax, Santander, Lloyds, Nationwide and Skipton Building Society all added 0.25 percentage points to their standard variable rate deals this week, just days after Threadneedle Street increased official interest rates from 0.5pc to 0.75pc.

Customers remortgaging have also seen rates rise. Earlier this week Yorkshire Building Society increased some of its fixed-rate deals by up to half a percentage point, double the Bank of England’s rise.

Online lender Habito also passed on higher rates to its customers, increasing the cost of its fixed-rate mortgages by up to 0.4 percentage points, while Nottingham Building Society raised rates by 0.6 percentage points.

The Bank of England has increased rates three times since December in a bid to manage soaring inflation. Lenders wasted no time in passing on the higher costs to borrowers, while savings rates remain at historic lows.

The lowest mortgage rates have doubled in the past six months and borrowers are now paying £840 a year more for the average loan than they did in October last year, according to analysis by broker L&C Mortgages. Experts have urged borrowers to lock in mortgage rates before they rise further this year.

But they must also contend with lenders withdrawing deals on a daily basis. Last month alone, lenders took more than 500 mortgages off the market, the biggest monthly drop since May 2020, when banks were braced for the economic fallout of the height of the pandemic.

Savvy borrowers keen to secure lower repayments for longer have been particularly disadvantaged by lenders. The number of 10-year fixed deals, which allow homeowners to lock in to a low rate for a decade, has dropped from 180 to 111 since February, according to Moneyfacts, an analyst.

Eleanor Williams of Moneyfacts said: “The mortgage market is currently very volatile and we recorded almost double the number of deal changes from lenders in February as were made in January.

“With lenders changing their deals so frequently, mortgages are available only for a brief period, so borrowers may want to act with a sense of urgency to make sure they secure their rate of choice.”

The cost of longer- term deals has crept up too. The average rate on a 10-year deal is now 2.89pc, up from 2.85pc in February.

This week Skipton Building Society relaunched its previously withdrawn 10-year deals, with rates that are 0.32 percentage points higher.

Aaron Strutt of Trinity Financial, a mortgage broker, said borrowers who failed to act quickly on cheap rates would miss the opportunity to lock in.

He added: “If you are waiting for details of a property purchase before you lock in to a mortgage deal, it’s likely the interest rate will be withdrawn or increased in the meantime.

“The super- cheap deals are clearly gone now and we are creeping towards 2pc being the best rate available. Prices will only continue to rise this year, especially in light of forecasts by the Bank of England.”