Mortgage Rates Surge as Lenders Increase Prices Amid Inflation Fears
Nationwide Building Society, Virgin Money, and TSB are among major lenders raising mortgage rates, pushing sub-5% deals toward extinction.
Households are facing a new wave of mortgage rate increases this week, with major lenders such as Nationwide Building Society, Virgin Money, and TSB hiking their prices. This trend is making sub-5% mortgage deals increasingly scarce, forcing most borrowers to accept rates between 5% and 5.5%.
These increases follow a series of rate hikes by most major lenders in recent weeks. Experts attribute these changes to concerns over rising inflation, exacerbated by geopolitical tensions and escalating energy prices. This situation marks a significant departure from earlier in the year, when rates below 4% were common, with some two-year fixes even dropping to 3.5%.
Currently, the lowest available five-year fixed-rate mortgage for those remortgaging stands at 5.02% with NatWest, while the most competitive two-year fix is 5.01% offered by Virgin Money. These figures represent a substantial increase in monthly payments for borrowers.
For instance, a homeowner with a £400,000 home loan, opting for a 25-year repayment term, would see their monthly payment rise from £2,003 at a 3.5% rate to £2,341 at a 5.01% rate. This amounts to an additional £338 per month.
Only individuals with a substantial 40% deposit may still be able to secure a sub-5% rate, though these offers are also expected to disappear soon. Yorkshire Building Society offers a two-year fix at 4.93% with a £1,495 fee, and Skipton Building Society has a five-year fix at 4.91% with a £1,995 fee.
For borrowers with a 20% deposit, the best available rates are now around 5.08%.
Aaron Strutt, a broker at Trinity Financial, noted that Nationwide will soon have only one fixed-rate mortgage below 5% for new customers: a two-year fix at 4.99% with a £1,499 fee for those with a 40% deposit. Strutt indicated that while some tracker deals remain competitive, the availability of sub-5% fixed-rate mortgages is dwindling rapidly. He also suggested that further rate increases from other lenders are likely in the coming days, with price cuts appearing unlikely in the near future.