Mortgage rates soar as lenders anticipate rising interest rates

Mortgage lenders have started raising record interest rates in anticipation of a base rate hike before Christmas.

September being “probably the last” month to see new mortgage rates fall, experts warn borrowers of a “dramatically altered” situation due to rising inflation that could trigger a hike in base rates .

The Office for Budget Responsibility said it expects inflation to hit 4.4% next year, before falling back to 2% by 2024. But it added that since the close of forecast, he thought it could peak at almost 5%.

Bank of England Governor Andrew Bailey has already hinted that the base interest rate, currently 0.1%, could be raised before the end of the year.

The average rate on new mortgages fell to 1.78% in September, but in October, more and more lenders started to raise their rates.

The TSB was the latest to announce rate changes on its residential lineup last week (October 29), as it raised rates up to 0.40% on its two-year fixed mortgage for first-time buyers for a loan-to-value of up to 90 percent.

“This will likely be the last set of figures from the Bank of England where the effective interest rate on new mortgages drops, as several lenders, including Barclays, HSBC, NatWest and TSB, have all raised their prices in anticipation of ‘a base rate. increase next week, ”said Mark Harris, managing director of mortgage broker SPF Private Clients.

“With the Bank of England hinting at a rate hike and the Chancellor in his budget referring to an average inflation rate of 4% next year, all indications are that the official rate will rise for the first time since March 2020. “

Harris added that whether or not the base rate is going up, mortgage rates have already started to rise, which means “the markets have already forecast a rate hike, and maybe two or three more by the end. next year “.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, agreed the market expected a base rate change as early as November.

“Inflation in October changed the situation considerably,” she said. Since September, Coles has said that “anticipation of looming Bank of England rate hikes has increased the cost [of] borrowing for banks, and this began to translate into higher interest rates.

But Coles stressed that rates, while rising, were still “near the low.”

She continued, “You can still get a five-year fixed rate mortgage, for 60% of your home’s value, for less than 1%, and a two-year fixed rate for 0.89%, there is. So still has some good offers for remortgagers looking to get a low rate.

Savings gap issues

As borrowing rose in September, with individuals borrowing £ 9.5bn in mortgage debt during the month – the highest since June – the Bank of England also recorded a decline in household savings to 9.4 billion pounds sterling.


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