23 February 2024 , 11:30
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HSBC, NatWest and Virgin Money are all increasing the cost of new mortgage deals from today.
The 3.99% five-year fixed rate for remortgage from HSBC was the last sub-4% deal remaining on the market. It comes after Santander, Coventry Building Society and TSB all raised rates on new fixed deals earlier this week.
Up until this month, mortgage rates had been coming down over expectations that the Bank of England could cut interest rates. Investors say this may now take longer than expected to happen. David Hollingworth, Associate Director at L&C Mortgages, said mortgage lenders are reacting to these fears.
He said: “This has forced fixed rates back up as funding costs have risen leading to HSBC being the last lender standing in the sub 4% bracket. That may catch some borrowers by surprise when the rate story this year has generally been one of falling rates.”
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He added: “There remains an expectation for base rate to be cut this year but the question mark remains over when that may come. We may well see market rates bobble around as new data is revealed but for now at least anyone that was holding off in the hope of further cuts may want to reassess their position.”
The Bank of England had been raising its base rate to try and lower inflation, which is currently at 4% - double its target of 2% inflation. The base rate, which affects borrowing costs, is at 5.25%. It has been held at this level for the last four meetings of the Monetary Policy Committee. The next interest rates decision will be on March 21.
Approximately 1.6 million fixed-rate mortgage deals are due to expire in 2024, meaning these households face higher monthly costs compared to what they're paying now. If you're due to remortgage, you can normally lock in a new deal up to six months before the end of your current one.
As of today, the average two-year fixed residential mortgage rate is sitting at 5.74%, according to Moneyfacts. This is up from an average rate of 5.72% on the previous working day. The average five-year fixed residential mortgage interest rate is at 5.31% which is up slightly from 5.30% yesterday.
David continued: "This could feel like a retrograde step for borrowers but it is a far cry from the very rapid and steep increases that we saw post Mini Budget and again last summer. Market rates aren’t skyrocketing in the same way that would force a sharp and significant rise in borrowing costs but it is enough that lenders are having to adjust in the face of higher funding costs."