Despite the decision of the Bank of England, UK lenders have begun to raise mortgage interest rates

Despite the decision of the Bank of England, UK lenders have begun to raise mortgage interest rates


Despite the Bank of England’s decision to cancel mortgages, mortgage borrowers’ chances of getting ultra-low deals have narrowed this week. Holding interest rate 0.1%, because banks and building associations raised interest rates for fixed-rate housing loans.

The central bank’s decision surprised the financial markets, which have taken this month’s rise into consideration. Nevertheless, according to the central bank’s inflation report, interest rates may rise to around 1% by the end of 2022.

Lender, already Raise interest rates In anticipation of the central bank’s actions, their housing loans continued to advance, further withdrawing low interest rates.

The HSBC, NatWest and Nationwide mortgage rate hikes took effect on Thursday. The Skipton Building Society said it would abolish all three-year fixed interest rates on Friday, and the Leeds Building Society announced an increase in mortgage interest rates, with loan-to-value ratios of 80% and 85%.

David Hollingworth, deputy director of brokerage L&C Mortgages, said: “Fixed interest rates have already responded to market expectations of interest rate hikes, so as Hit a record low Interest rates below 1% are rapidly disappearing. “

According to the broker’s calculations, for borrowers who pay an average standard floating rate of £150,000 over a 20-year repayment mortgage, a rise in interest rate to 1% will make them pay an extra £71 a month.

According to data from the financial website Moneyfacts, the number of transactions with less than 1% dropped from 131 in the first week of October to 30 on Wednesday.

One lender that cancelled this interest rate this week was HSBC, which raised the interest rate on its two-year fixed-rate mortgage from 0.99% to 1.14%. Nationwide increased its five-year interest rate on 60% LTV transactions from 1.24% to 1.34%.

Smaller rate hike Influence Due to the long-term growth of fixed-rate mortgages, the interest rate of mortgage households is higher than in the 1990s and 2000s, which can protect borrowers from rising interest rates within the agreed period. In the past four years, more than 90% of mortgage loans were fixed-rate loans.

Financial data in the UK shows that borrowers are increasingly favoring five-year fixed-rate transactions, which has been further segregated. It currently accounts for 46% of mortgage advances, compared with a two-year fixed interest rate of 45%.

Ray Boulger, senior mortgage technology consultant with broker John Charcol, said: “The vast majority of people will not be affected by changes in bank interest rates, at least in the initial stage.”

Andrew Wishart, a housing economist at Capital Economics, said that the impact of a 1% interest rate hike in 2022 is unlikely to reverse the recent growth trend in the real estate market. “Currently, mortgage payments are equivalent to 39% of the median full-time salary after tax, which is below the historical average of 43%. A rise in interest rates to 1% will only bring mortgage payments to the long-term average,” he said.

Halifax said on Friday that the average house price in October reached a new high of £270,000, and the annual inflation rate was 8.1%.

Simon Gammon, managing partner of broker Knight Frank Finance, said that the prospect of rising interest rates means that those who have already used funds to apply for mortgages should consider the option of locking in cheaper deals before interest rates rise further.

“Those who have fixed-rate transactions that will end in six to nine months may be locked in with new or existing lenders three to six months after they need to trade. You can almost book next year’s money on Christmas Day. .”

Some borrowers are willing to pay fees to close existing transactions early to ensure a longer-term solution and give you peace of mind. Aaron Strutt, product director at broker Trinity Financial, said a client recently decided to pay an exit fee of £12,000 for two five-year mortgages to lock in a 10-year low interest rate.

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