ANOTHER three lenders have hiked their mortgage rates in a bitter blow to first-time buyers and those needing to remortgage.
HSBC, NatWest and Virgin Money pulled various deals overnight and upped their fixed rates this morning.
GettyLenders are hiking their fixed mortgage rates[/caption]
It is the latest wave of lenders pulling cheaper deals only to come back with higher rates.
It means there will no longer be any five-year fixed mortgage deals on offer with rates below 4%.
It comes after Santander, Coventry Building Society and TSB all raised rates on new fixed deals earlier in the week.
The lowest five-year fix for buyers and those remortgaging is now offered by First Direct at 4.04%.
Across all deposit sizes, the average two-year fixed homeowner mortgage rate on the market hit 5.70% on Tuesday, according to Moneyfacts.
And the average five-year fixed homeowner mortgage rate was 5.28% on Tuesday.
Why are lenders upping mortgage rates?
David Hollingworth, associate director at L&C Mortgages said: “There has been a large amount of pricing activity with lenders shifting rates regularly to adjust to the fact that markets now anticipate that base rate may take longer to fall than had previously been hoped.
Decision-makers on the Bank of England‘s Monetary Policy Committee (MPC) voted to keep interest rates at 5.25% for the fourth consecutive time at the beginning of February.
At the beginning of the year, markets forecasted four rate cuts in 2024, which would have taken the Bank’s rate to 3.75% by Christmas.
However, investors are now expecting the first rate cuts to begin in September.
“This has forced fixed rates back up as funding costs have risen leading to HSBC being the last lender standing in the sub 4% bracket.
“That may catch some borrowers by surprise when the rate story this year has generally been one of falling rates,” David added.
How do higher mortgage rates affect my payments?
HIGHER mortgage rates make monthly repayments higher.
Over two years ago, you could get a two-year fixed rate mortgage for 0.99%.
On a £100,000 mortgage taken over 25 years, this would have meant monthly repayments of £376.
If you were to borrow £100,000 over the same term today at the average two-year fixed rate of 5.28%, your monthly repayments would be £601.
That’s an extra £225 a month and it’s forcing borrowers to take longer deals.
What does it mean for mortgage holders?
Lenders are primarily upping their fixed mortgage deals instead of their standard variable and tracker deals right now.
Around 1.6 million households are currently on fixed mortgage deals, which later expire this year.
This means that over a million households face the prospect of increasing monthly payments by hundreds of pounds.
And 420,000 of these households will see their fixed deal expire between March and May.
How to get the best deal on your mortgage
If you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
But there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.