The Daily Telegraph - Saturday - Money
Christmas crisis for borrowers as rates rise
Homeowners face paying thousands more on their mortgage as lenders race to raise prices in the run-up to Christmas.
Rates keep rising as banks and building societies avoid having the cheapest deal on the high street and being swamped by eager borrowers.
Each time rates tick up – even by just 0.1 percentage points – it adds thousands of pounds in interest to a mortgage.
Homebuyers are rushing to lock in low rates. Knight Frank Finance, a broker specialising in high net worth borrowers, reported an 85pc increase in people remortgaging in October and November this year, compared with the same months in 2020.
Hina Bhudia, of the firm, said: “We are seeing repeated small but notable increases in rates of usually 0.1 or 0.25 percentage points each time.
“This may not seem like much, but on a five-year fixed rate of 1pc on a £ 500,000 loan, an increase of 0.1 percentage points will equate to an additional £2,500 paid in interest. So remortgaging even days earlier can save thousands.”
Lenders began increasing rates in October, ahead of an anticipated move by the Bank of England to raise the Bank Rate the following month. This never materialised, but banks have continued to make mortgages more expensive in the weeks since. Fixed- rate sub1pc mortgages have now almost disappeared, according to financial analysts Moneyfacts, with the number of deals falling from 131 to 10 in two months.
The average interest on a two-year fixed- rate deal has increased from 2.25pc at the beginning of October to 2.33pc this week. Likewise, the average five-year fixed rate has jumped from 2.55pc to 2.62pc.