The Daily Telegraph

Lenders increase mortgage costs ahead of expected Bank Rate rise

- By Rachel Mortimer

BANKS and building societies have rushed through mortgage rate rises ahead of what could be the largest increase in interest levels in three decades today, heralding more pain for home owners in the coming days.

Borrowers have been told to “buckle up” as the country’s biggest lenders rush to increase interest rates ahead of more mortgage misery this week.

Banks and building societies have rolled out a raft of mortgage rate rises in the past two days, but brokers have warned interest rates could jump again before the end of the week.

It comes as lenders scramble to get ahead of an anticipate­d 0.75 percentage point increase to the Bank Rate today.

A jump of this size would take the central interest rate – used by lenders alongside other market indicators to set pricing for borrowers – from 1.75pc to 2.5pc.

Lewis Shaw, of broker Shaw Financial Services, said: “Borrowers should buckle up. The writing is on the wall for a significan­t Bank Rate rise and lenders have pre-emptively hiked rates, as they don’t want to get caught short scrambling to re-price their deals.”

Yesterday, Santander increased its fixed-rate mortgages by up to 0.7 percentage points, with the rate on a twoyear deal for borrowers with a 10pc deposit and using a broker rising from 4.04pc to 4.74pc. For a buyer with a £200,000 mortgage a rise of this size equates to an additional £1,872 in interest across the lifetime of the deal.

Natwest increased rates on some of its two and five-year fixed deals for buyers by up to 0.35 percentage points, while HSBC increased rates for homeowners and landlords by up to 0.25 percentage points. Experts warned borrowers could be hit by another wave of rises after today’s Bank Rate decision. Mark Robinson, of Albion Forest Mortgages, said: “The way lenders have been behaving lately I would not be in the slightest bit surprised if they did a double hike on their rates this week.”

If the Bank Rate rises by 0.75 percentage points and high street lenders pass the increase directly to mortgage borrowers, the average rate on a two-year fixed deal will rise from 3.92pc in August to 4.67pc.

Rapid rate rises risk blindsidin­g borrowers remortgagi­ng this year, adding hundreds of pounds to their monthly bills, warned Jiten Varsani, of London Money Financial Services.

Mr Jiten said: “Sudden and multiple large rate increases over a short period mean even those who have planned ahead and built emergency funds are going to struggle.

“One client has seen a £310 increase in monthly mortgage payments, along with a £250 rise across other expenses such as utilities, groceries and fuel. It means an additional £6,720 each year.”

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