The cost of mortgages continued their inexorable rise on Tuesday as more lenders upped the interest rates on their fixed-rate deals.
Latest data from analysts Moneyfacts showed the average rate on a two-year fix was up from 5.72 per cent to 5.75 per cent this morning. On a five-year fix they were up from 5.41 per cent to 5.44 per cent.
Coventry Building Society on Tuesday became the latest lender to launch a range of new deals at higher rates to replace those that were pulled from the market last week.
The higher rates across the market will hit first-time buyers as well as existing borrowers who need to remortgage when their current deals expire.
Average rates were last at these levels in January but were well over six per cent last autumn in the wake of Kwasi Kwarteng’s mini-Budget.
Rates on buy-to-let mortgages are rising faster than those on residential loans with two-year deals up from 5.92 per cent to 5.98 per cent and five-year fixes rising from 5.87 per cent to 5.96 per cent. The surge has been driven by expectation that the Bank of England will have to hike rates again when its Monetary Policy Committee meets later this month.
The MPC is widely expected to increase the rate by another quarter point to 4.75 per cent with further rises coming in August and into the autumn.
But brokers said a further squeeze on homeowners could have a devastating impact.
Riz Malik, director at R3 Mortgages, warned an increase in the base rate to a predicted 5.5 per cent would exacerbate mortgage arrears and prompt further declines in house prices. He said: “There is a collective hope that the Bank of England will realise its decisions might be causing more harm than good to the UK economy and halt the increases. If it does not, Londoners should review their mortgage arrangements sooner rather than later if they are coming up to renewal.”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, said: “It makes no logical sense for rates to increase further. They have zero effect on inflation that isn’t caused by increased demand.”
