Some average fixed mortgage rates have climbed to their highest levels in weeks or months.
Some average fixed mortgage rates have climbed to their highest levels in weeks or months.(Image: Getty )
Mortgage borrowers have been warned rates could rise further in the coming days as major lenders start to reprice their deals.
The average two-year fixed homeowner mortgage rate on the market reached 5.63 per cent on Monday morning, up from 5.60 per cent on Friday, according to Moneyfactscompare.co.uk. This is the highest average two-year rate recorded by the financial information website since August 10.
Meanwhile, the average five-year fixed homeowner mortgage rate increased from 5.64 per cent on Friday to 5.68 per cent on Monday – its highest level since May 11.
Moneyfacts said more lenders are expected to review their mortgage rates over the coming days in response to higher swap rates, which are a key influence on the pricing of fixed mortgage deals.
Major lenders including HSBC and NatWest have already increased rates since the start of September.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates.
“Major lenders, which include HSBC and NatWest, have increased rates since the start of September.
“The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages, with more moves expected in the coming days.
“Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages.”
The warning comes after swap rates increased sharply during recent weeks amid renewed concerns over inflation and the continuing conflict in the Middle East.
Moneyfacts said the latest impact on mortgage products has so far been significantly less severe than the disruption seen when the conflict began around six months ago, when many lenders withdrew fixed-rate deals.
Only a small number of lenders have withdrawn fixed mortgages from sale since the beginning of September, according to Moneyfacts.
However, borrowers who had been waiting in the hope of securing cheaper mortgage rates have been urged not to delay seeking advice.
Moneyfacts calculated a 0.25 percentage point increase on a typical two-year fixed mortgage could add around £38 to monthly repayments.
That would be an additional £456 over a year, based on borrowing £250,000 over 25 years and a rate increasing from 5.63 per cent to 5.88 per cent.
Ms Springall said: “Borrowers expecting mortgage rates to drop in the coming weeks have had their hopes dashed.
“The prolonged conflict increases the chances for the Monetary Policy Committee to vote for an increase to the Bank of England Base Rate. However, this might not happen until November, according to economists.
“Regardless of any changes to BBR, it is still essential borrowers do not delay seeking advice to navigate the mortgage maze.”
The Bank of England held its base rate at 3.75 per cent at its most recent meeting, although three of the nine members of the Monetary Policy Committee voted for a 0.25 percentage point increase.
Its next interest rate decision is due on September 17.
People approaching the end of a fixed mortgage deal
Moneyfacts said homeowners approaching the end of an existing fixed deal could consider arranging their next mortgage around six months before their current product expires.
Borrowers who do nothing when a fixed deal ends will typically move onto their lender’s standard variable rate (SVR), unless other arrangements are made.
The average SVR is currently 7.13 per cent, according to Moneyfacts.
Its calculations show repayments on a £250,000 repayment mortgage over 25 years would be around £1,787 per month at that rate.
This compares with around £1,555 per month using the current 5.63 per cent average two-year fixed rate – a difference of approximately £230 each month.
Ms Springall said: “Those looking to remortgage could do so around six months in advance by securing a product transfer with their existing lender, for peace of mind.
“Securing a fixed rate deal compared to falling onto a revert rate is still wise.”
Mortgage customers should consider the overall cost of a new deal rather than the headline interest rate alone, as product fees and other charges can affect how much they ultimately pay.
