Banks and building societies had already begun putting up mortgage interest payments before the Bank of England announced its latest base rate hike to 2.25%, piling more pressure on homebuyers and owners.
For some, the increased charges could add thousands of pounds to their total home loan costs over the next couple of years.
Santander, NatWest and HSBC are among the lenders that have this week increased their mortgage rates for new borrowers – in some cases by as much as 0.8 percentage points.
Other banks and building societies are expected to quickly follow suit and reprice their deals upwards now that the Bank has raised interest rates by 0.5 percentage points – the seventh increase since December.
Santander hiked many of its home loan rates on Wednesday. That means someone looking to remortgage with the lender through a broker on a two-year fixed rate that lets them borrow 90% of the property’s value will now pay 4.89% with no fee.
That is 0.8 percentage points more than the amount that someone who signed up for the equivalent deal at the start of this week would have been charged.
Similarly, some of Santander’s two-year fixed rate deals aimed at homebuyers have had their rates increased by 0.7 percentage points.
For example, interest on a two-year fix aimed at buyers with a 10% deposit has been raised from 4.04% to 4.74%. For someone borrowing £250,000 on a repayment basis on a 25-year term, that difference adds up to an extra £97 a month – a monthly payment of £1,423 versus £1,326 – or £2,328 extra over the two-year initial period.
NatWest raised some of its rates by 0.35 percentage points on Wednesday, so a two-year fix for a homebuyer using a broker and borrowing 60% of the property’s value now has an interest rate of 4.42% rather than the 4.07% earlier this week. HSBC also announced a raft of new rates, which took effect on Tuesday.
Across the mortgage market as a whole, the average two-year fixed-rate deal is now at 4.09%, its highest since 2014, according to the app TotallyMoney and the website MoneyComms.
Some of those with a fixed-rate deal due to end later this year or early next year are likely to be very concerned about the fact that the price of new fixed-rate mortgages has risen sharply during the past few months.
Andrew Hagger, a personal finance expert at MoneyComms, said: “Mortgage borrowers approaching their fixed-rate renewal are in for a massive shock when they see the eye-watering increase in their monthly repayments.”
He added: “Facing hundreds of pounds extra in mortgage repayments on top of soaring food, fuel and energy costs means some borrowers will face a serious monthly budget deficit.”
Chris Sykes, the technical director at broker Private Finance, said this week’s lender moves were “not wholly unexpected” in terms of expectations for the Bank base rate, as well as “where the rate markets are in general” and the other economic risks that banks and building societies took into account.