Mortgage rates rise as lenders increase cost of home loans
UKPulse Property Desk
Major UK mortgage lenders have increased rates on new home loans, dashing hopes for borrowers expecting a drop. This follows global economic uncertainty and rising UK government borrowing costs.
- Nearly all major UK mortgage lenders have raised the cost of home loans in recent days.
- The average rate for a new two-year fixed deal is 5.65%, and 5.70% for a five-year product, as of Tuesday.
- Borrowers whose five-year deals are ending could face paying over £5,000 more annually on a new deal for the same borrowed amount.
Nearly all major mortgage lenders in the UK have announced increases in the cost of home loans in recent days. This development has disappointed borrowers who were anticipating a decrease in rates.
Rachel Springall from Moneyfacts stated that borrowers expecting rates to drop have had their hopes dashed. Analysts are uncertain if further increases are imminent but advise those needing a new deal to act promptly.
For example, someone whose five-year deal is concluding could pay over £5,000 more per year on their next deal, assuming they borrow the same amount. The average rate for a new two-year fixed deal is 5.65%, while a five-year product averages 5.70% as of Tuesday.
Global economic uncertainty, stemming from the Iran war, has contributed to higher deal costs. More recently, rising UK government borrowing costs have also impacted mortgage rates, a pressure maintained in the latest UK debt sale.
Why this matters: The increases in mortgage rates will be a further blow to those coming off cheaper five-year deals and could deter potential home buyers.
What this means for you: If your fixed mortgage deal is nearing its end, you may face higher repayment costs. Lenders often allow locking in a new deal six months in advance, with an option to switch if rates fall.