Mortgage ‘pain’ not easing for borrowers as average fixed rates climb

Fixed mortgage rates are already being pushed higher, ahead of the Bank of England base rate decision later this week, according to a financial information website.On Tuesday, the average two-year fixed homeowner mortgage rate on the market was sitting at its highest level since May 28, while the average five-year fix was at its highest since April 12, Moneyfacts said.It said the average two-year fixed residential mortgage rate on the market on Tuesday was 5.73%, up from 5.68% on Monday.The average five-year fixed residential mortgage rate on Tuesday was 5.78%, up from 5.73% on Monday.The next Bank of England base rate decision will be released on Thursday.The rate, which currently sits at 3.75%, is expected by some finance commentators to remain unchanged on Thursday, although they have also pointed to the potential for inflationary pressures to prompt rates to increase in the months ahead.Moneyfacts said some lenders have made mortgage rate hikes twice in September, amid higher swap rates, which are used to price mortgages.The choice of products has also reduced, with 7,426 homeowner mortgage products on the market counted by Moneyfacts on Tuesday, down from 7,458 on Monday.Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “A second wave of mortgage rate hikes has begun from the major banks in reaction to growing concerns surrounding inflationary pressures.”She added: “It is highly likely other lenders will follow suit to adjust rates, and with some deals withdrawn from the market, it is expected any returning deals could well be priced higher.”Ms Springall said the moves demonstrate “how fixed mortgage rates are not intrinsically linked to adjustments to the Bank of England base rate”.Read MoreShe said that, despite a base rate hold being expected this week: “The mortgage pain shows no sign of easing for those borrowers who cannot yet lock into a new deal, particularly those with a five-year fixed who are not due to refinance until 2027.“Back in February 2022, there were sub-2% fixed mortgages available, so moving off this rate will be a huge shock for borrowers.“In the meantime, it is vital that lenders and brokers help customers understand the implications of ending their deal early, such as the early repayment charges.”Ian Harris, president of NAEA (National Association of Estate Agents) Propertymark, said: “Rising mortgage rates will be a concern for many homeowners and prospective buyers already navigating challenging affordability conditions.“With fixed-rate deals continuing to increase ahead of the next Bank of England decision, consumers are facing greater uncertainty over the cost of borrowing and what this means for their household finances.“Those coming to the end of historically low fixed-rate deals could face a significant increase in their monthly repayments when they remortgage.“This underlines the importance of consumers engaging with a qualified mortgage adviser and exploring their options as early as possible, rather than waiting until their existing deal expires.“For the housing market to operate effectively, confidence and affordability are crucial.“Continued volatility in mortgage rates risks putting further pressure on buyers who are already stretching their finances and could lead some households to delay moving altogether.”Aneisha Beveridge, research director at Connells Group, said: “Higher mortgage rates are affecting all borrowers, but it’s those with smaller deposits and higher loan-to-value mortgages who are feeling the pain most acutely.“Many first-time buyers who fixed two or five years ago are now coming to the end of their deal without having benefited from the sort of house price growth that would have significantly reduced their loan-to-value ratio.”