The average mortgaged homeowner in the UK has seen their monthly payments rise by around £44 a month since last autumn with many lenders upping some product prices before the Bank of England raises the base rate.
The country’s historically low mortgage rates have been slowly creeping up since the Bank of England upped the base rate to 0.5% in November last year, after it had spent around 15 months at an all-time low of 0.25%, while most predict that the rate will rise again to 0.75% next month.
In response, lenders have been edging up their most popular mortgage deals, with two-year fixed rates now averaging 2.5% for the first time since July 2016, a 0.09% rise on last month’s 2.41% average. The increase means that the average UK homeowner with a £175,000 mortgage will be paying an additional £44 a month compared to last autumn.
Why are rates rising now?
According to Charlotte Nelson from Moneyfacts, the recent mortgage product increases are an indication that the predicted base rate rise in May is highly likely, as lenders base their rates on SWAP and LIBOR rates as well as wider economic indicators, and an increase in these rates means higher costs for mortgage providers who therefore pass this onto borrowers.
“However, as well as the latest fall in inflation, Mark Carney suggested in a recent interview that Britain leaving the EU has cast doubt on an imminent rate rise,” she added. “If the markets do cool off as a result, it will be interesting to see if mortgage rates will follow suit.”
Mortgage activity has soared recently as more people rush to take out new mortgages or remortgage their properties before the base rate rise happens, with more than 50,000 mortgages taken out across the UK in February. Those on standard variable rates (SVR) are increasingly looking to fix their rates now to get a better deal.
