The Halifax has published new rate rises due to come into effect on 3 May, that are in some cases more than double what they were a year ago.
A two-year fixed-rate remortgage at 60% loan-to-value, with a £1499 fee, will be 2.62% from Tuesday. The rate for the same product was 1.26% in July 2021.
The hike comes at a time when the country faces a cost of living crisis. Inflation rose to 7% in the year to March, the highest rate since 1992 and up from 6.2% in February. Energy bills rose by an average of 54% this month, interest rates have lifted three times in four months to 0.75%, while national insurance contributions and council tax bills rises also kicked in this month – sparked by supply chains shortages and the war in Ukraine.
House prices in the UK rose by 10.9% on an annual basis, with the average property in the UK now valued at £276,755, according to data from the government’s UK Property Transactions Statistics data released earlier this month.
A range of brokers warned that rate hikes are set to be one of the key themes in the housing market this year.
Founder and director at specialist broker SEMH Graham Cox says: “Many clients whose current ultra-cheap rate is coming to an end will get quite a shock when they come to remortgage. They see the Bank of England base rate creeping up but don’t realise that lender’s mortgage rates are increasing by much more.
“Many people will have experienced some adverse credit recently, thanks to the pandemic, which means their new rate could be higher still. Some may even be left stranded on the lender’s standard variable rate.
“All the latest headlines from Halifax and Nationwide still paint a picture of business as normal, house prices continuing on their inexorable rise. But I think we could see a very dramatic sea-change in the autumn.”
Altura Mortgage Finance managing director Rob Gill says: “Mortgage rates are spiralling ever upward at the moment with major lenders repricing by the day. Several major lenders have matched Halifax in now having core rates such as two and five-year fixes at more than double the lows of last Autumn.
“Even the chancellor [Rishi Sunak] is issuing dire warnings of four-digit increases in mortgage payments for borrowers, a clear sign that concern is spreading about the impact this will have on homeowners.
“Where this inexorable rise in interest rates can continue in the face of the overall cost of living crisis is far from certain. If the squeeze continues, lenders will start competing for scarcer new business, and eventually, the Bank of England will have to ease back on the current cycle of base rate rises.”
Founder and mortgage expert at Shaw Financial Services Lewis Shaw adds: “With the Bank of England poised to make another base rate rise in May, mortgage lenders are getting ahead of the curve. After the historic lows of sub-1% deals last summer and Autumn, this is a massive swing that most consumers aren’t used to.
“Moreover, when you add into this tax hikes for people on above-average salaries, who happen to be the demographic that has mortgaged themselves to the hilt, energy prices rising faster than Elon Musk can tweet, and inflation predicted to hit double figures, it’s safe to say this is going to be a turbulent year.
“All of this taken together, we can assume that some of the property price gains made in the past 18 months will be eaten away as prices cool towards the end of the year and take maybe a 5% dip in 2023. So do we expect a crash? No.
“However, the people who got carried away in bidding frenzies and ended up paying more than a surveyor said the property was worth, may rue the day they didn’t take the word of a chartered surveyor as gospel.”
