05 June 2023 , 18:12
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Mortgage borrowers are facing the biggest squeeze since the Tories’ bungled mini-Budget.
A flood of lenders have upped rates in the aftermath of figures a fortnight ago revealing a smaller-than-expected drop in living costs.
Some of the best deals are being withdrawn at a few hours’ notice.
“Grab it while you can,” was the advice to borrowers from David Hollingworth, an associate director at broker L&C Mortgages.
He compared the situation to last September’s mini-Budget, when then-Prime Minister Liz Truss ’s handling of unfunded tax cuts led to rates soaring.
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TSB has increased the rate on its two and five-year fixed deals by up to 0.75% and temporarily withdrawn 10-year deals.
Halifax has raised rates on its two-year fixed mortgages by up to 0.30%, Santander upped new mortgage rates by as much as 0.43% yesterday and Coventry Building Society will increase its two, three and five-year deals today.
Industry experts Moneyfacts said the average two-year fixed rate on a £200,000 mortgage over a 25-year term is now 5.64%, up from 5.34% before last month’s inflation data.
The increase has added another £35 a month to the average repayments for those taking a new deal.
The jump in rates is forcing borrowers to lumber themselves with longer agreements.
Trade body UK Finance said a record one in five first-time buyers are signing up to mortgages of more than 35 years.
About 1.5 million borrowers are due to come off an existing fixed rate deal this year, and face a real shock.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “They’ve been shielded from the horror of rate hikes so far by a fixed mortgage, and when their deal runs out, they face the full force of the rises in one single hit.”
Dr Jeevun Sandher, of the New Economics Foundation, added: “We are all still paying the price for the Truss mini-Budget.”
Inflation had also surged because “a decade of under-investment in energy and insulation”, he added.
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