High street lenders raise mortgage rates more than the Bank of England
Some lenders raised mortgage rates by twice the Bank of England base rate, while yields on savings accounts remained close to zero in many cases.
HSBC raised prices for fixed-rate mortgages by 0.45 to 0.5 percentage points this week, well above the quarter-percent increase in the base rate. Nationwide also raised rates by 0.4 percentage points.
The Bank of England’s latest decision will have an immediate impact on the 1.9 million borrowers on standard or tracker variable rate mortgages, which move with the base rate.
On a £200,000 25-year mortgage, that means an extra £700 in interest payments over two years.
Around 75% of Britain’s 9million mortgage borrowers are on fixed deals, according to banking trade body UK Finance.
Fixed rates are also on the rise, with the average two-year fixed rate up almost 1% since December 2021.
The average two-year fixed rate is now 3.25%, down from 2.34% in December, according to figures from Moneyfacts.
Five-year contracts are up 3.37% from 2.64% six months ago.
As the spread between the average two-year and five-year fixed rate has narrowed, fixing longer may be a smart move, said Moneyfacts finance expert Rachel Springall.
Even longer terms are available at similar rates, with the average 10-year fixed contract now at 3.36%.
Borrowers now have more incentive to lock in a rate rather than switch to their lender’s standard variable rate (SVR).
The difference between the average two-year fixed rate and the SVR is 1.66%, which equates to a saving of £4,418 over two years on a £200,000 25-year mortgage.
Ultra-cheap deals for buyers with plenty of equity have largely disappeared. The average five-year fixed rate at 60% of the loan-to-value (LTV) ratio rose from 1.65% last October to 3.05%, according to Moneyfacts.
With further increases in the cost of borrowing expected later this year, it may be time to consider switching to a cheaper deal while mortgage rates are still relatively low, according to the team at Online Mortgage Advisor .
Typically, mortgage advisers recommend considering a mortgage if you have six months or less left on the introductory period of a fixed rate deal.
Remortgaging could save you hundreds a month, so switch and fix if you find a better rate. Check the calculations first to make sure you don’t have to pay an early exit fee.
At the end of your mortgage contract, you will automatically be transferred to your lender’s basic contract – an SVR, which will probably mean that you will end up paying a higher rate.
In most cases, you’ll save more by upgrading to a new plan. If there is a better offer elsewhere, you can switch lenders.
However, if you change lenders, you will need to hire a real estate lawyer or real estate agent, which will increase the costs.
Savers who stick with their bank may get a bad deal, Moneyfacts warned.
Among the largest high-street brands, some have only passed 0.09% since December 2021 and none have passed all four base rate increases, which equates to 0.9%.
Barclays’ Everyday Saver pays 0.01% at £10,000, Halifax has raised its Everyday Saver rate to 0.25% from 0.01%.
HSBC’s Online Bonus Saver – pays 0.45% on a balance of £10,000 when no withdrawals are made, up from 0.05% previously.
Lloyds Bank raised the rate on its Easy Saver from 0.01% to 0.2% while NatWest raised the rate on its Instant Saver from 0.01% to 0.1%.