Mortgage deal alert: Homeowners urged to get new deal ahead of interest decision

A string of lenders rushed to raise their rates yesterday in anticipation of a Bank of England move this morning. It looks likely to hike the base rate in an attempt to curb soaring inflation.

Stuart Powell, managing director of Ocean Mortgages, said: “Never before in my 18 years in the mortgage industry have I seen clearer signs that interest rate increases are on the way.

“Rather than put it on the New Year’s resolution list, smart borrowers will approach a broker now and review their mortgage rate to fix before all the low rates disappear.”

A quarter point rise in the base rate of 0.1 per cent means an extra £26 per month mortgage payment on average for a tracker rate customer and £16 for those on a standard variable rate.

Even if rate setters hold fire this month, the era of cheap money is coming to an end, finance experts warn.

Homeowners not already locked into the best fixed rates have already seen interest rates leap by nearly a third in just seven days.

Last week a borrower with a 20 per cent deposit could take out a two-year fixed rate loan paying 1.24 per cent but this has risen to 1.64 per cent.

Platform, part of the Co-op Bank, has pushed up the costs of some of its mortgages by up to .44 percentage points.

TSB has also “temporarily” pulled eight of its two and fiveyear fixed-rate deals.

The West Bromwich Building Society increased all but three of their fixed rates while the Yorkshire Building Society withdrew all of its tracker rates.

The rush to pull the best rates comes as the price of the average UK home tops a quarter of a million pounds for the first time. A typical three-bedroom semi now costs £250,011 – £30,728 up since the pandemic struck in March 2020 – according to Nationwide.

That’s a 9.9 per cent annual surge, and a slight uptick of 0.7 per cent compared to September.

Andrew Montlake, of brokers Coreco, said: “The end of crazily low mortgages is nigh and sub-one per cent loans look destined for the dustbin of history.

“We now have a whole generation that has never seen an increasing interest rate cycle. And, with the cost of living also rising, we are already seeing a rush of borrowers anxious to fix.”

However, 74 per cent of mortgage borrowers are on fixed-rate deals – so would be protected from the immediate impact of any base rate increases, according to trade association UK Finance.

Lewis Shaw, of Shaw Financial Services, urged others to act quickly to save themselves from higher mortgage payments. He said: “With the cost of living rising and the spectre of inflation breaching four per cent, now is the time to act. Like most things in life, failure to prepare means you’re preparing to fail.”

Millions of borrowers with tracker mortgages will see an immediate rise in their monthly payments if the Bank’s Monetary Policy Committee (MPC) vote to raise rates. It will announce its decision at midday.

First-time buyers will suffer too. Last week the average rate for a borrower with a five per cent deposit on a two-year fixed mortgage was 2.45 per cent – it is now 2.69 per cent, according to data analyst Defaqto.

Four of the country’s biggest lenders, Barclays, HSBC, NatWest and TSB, increased their interest rates hours after the Budget and Spending Review last week.

The MPC is expected to make a series of interest rate increases with speculation of a base rate of one per cent by the end of 2022.

The central bank has come under pressure to cool rising prices amid inflationary pressure.

Consumer Price Inflation slowed last month, but the 3.1 per cent reading was still the second highest figure the Office of National Statistics has recorded since 2012.

Investec have said they believe the MPC will vote in favour of increasing interest rates by 0.15 percentage points to 0.25 per cent.

It said: “We judge that concerns over inflation will outweigh the risks from a potential upturn in unemployment after the end of the furlough schemes.” One group who will welcome a rise is savers after years of meagre returns.