How mortgage firms are ALREADY hiking rates as interest rate rise expected – how to avoid an increase

HOMEOWNERS could see hundreds a year added to their cost of their mortgage as rates rise in anticipate of an interest hike.

The Bank of England is widely expected to increase interest rates when it meets next week.

That will have a knock-on effect on the monthly repayments of millions of mortgage holders.

Those on a tracker mortgage will feel the effects immediately, while those on a fixed rate will notice the change when their deal ends.

A number of mortgage providers have already started to increase interest rates on their deals in anticipation of a rate rise, it has emerged.

The increases have been coming in over recently days, and there are fears a hint over rates from Chancellor Rishi Sunak in the Autumn Budget could spark more.

The Office for Budget Responsibility (OBR) has warned that mortgage interest payments could increase by 5.6 per cent next year and an eye-watering 13.1 per cent the year after.

It would add hundreds of pounds to repayments for millions of homeowners.

Laura Suter, head of personal finance at AJ Bell, said: "The figures show that homeowners need to be braced for a big leap in mortgage costs."

She added: "Rising mortgage costs will come on the back of increasing interest rates from the Bank of England.

"Homeowners need to be aware that it's a case of if, not when, for an interest rate rise now and the clock is ticking on the record low mortgage rates we've all become accustomed to."

Which mortgage rates are going up?

Figures from mortgage broker London & Country show that many providers have been edging rates up over recent weeks.

On October 19, Barclays increased rates on its low loan-to-value (LTV) mortgages – that will affect buyers will smaller deposits.

Natwest removed its latest five-year fixed deal at less than 1% on October 21.

Leeds also withdrew a range of fixed deals, and has none under 1% now.

Nationwide made a number of changes that came into effect on October 27.

It increased a number of rates by 0.05%. A two-year fixed deal with a 60% LTV is now 0.99% with a £1,499 fee.

A five-year fixed at 75% LTV increased by 0.05% to 1.19% also with a £1,499 fee.

According to L&C, on the day of the Budget, Natwest increased rates on all its residential mortgages at 60%, 70% and 75% LTV.

HSBC increased almost all fixed deals at these levels for the second time in a fortnight.

The lender has just one deal under 1% remaining.

Meanwhile, Virgin has increased rates on 65% and 75% LTV two- and five-year fixed deals.

Lenders told us that rate changes were part of regular reviews and not to do with yesterday's Budget.

What do rising mortgage rates mean?

Anyone currently on a fixed mortgage deal will not be affected by these changes, but will notice that deals are considerably more expensive when they current offer ends and they come to remortgage.

AJ Bell said someone with a £250,000 mortgage who fixed earlier this year and came to remortgage in 2023 would see an extra £600 added to their annual mortgage costs.

On a £450,000 mortgage, annual repayments would go up by £1,068.

The changes will also affect first-time buyers.

Suter explained: “First-time buyers are likely to feel any rise in mortgage interest rates the most.

"Some have borrowed up to their affordability limit to get onto the property ladder, and so will find additional monthly costs harder to swallow.

"First-time buyers also typically have a higher loan-to-value, or lower deposit, meaning they have more borrowing on the average property and already have higher mortgage rates.”

What should I do about rising mortgage rates?

If you're on a tracker mortgage and worried about rising rates, you could consider moving to a fixed deal while there are still some good offers about.

Some lenders are also offering ultra-long fixed deals, which will give you certainty over your monthly repayments for 10 years or even longer.

Habito, for example, offers a 40-year fixed deal at 5.1%.

It comes with a hefty fee of £1,995 but would give you certainty over your outgoings for four decades.

You could also consider overpaying your mortgage if you can afford it, to get debt-free ahead of time.

Martin Lewis has recently urged homeowners to consider remortgaged to save thousands of pounds.

But half of homeowners have never remortgaged because they think it will be too much hassle.

Top tips include:

  • Understand what your current mortgage deal is
  • Find the cheapest deal your existing lender is offering
  • Compare this offer to the cheapest deals that other lenders are offering
  • Use online tools such as MoneySavingExpert's mortgage comparison checkers and mortgage calculators to compare deals
  • Check your credit score and if you can afford a new mortgage deal
  • Consider using a mortgage broker
  • Check if the lender charges a fee for locking in the best rate – this can be £100-£250, Martin says
  • Use your savings to borrow less on your mortgage and pay less per month

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