Panic for homeowners as three more banks raise mortgage rates

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Three of the country’s biggest mortgage lenders have pulled deals and increased the cost of their loans ahead of the Bank of England’s expected interest rate rise. 

Experts said it was increasingly likely millions of borrowers would be dealt a blow on Thursday as the Bank votes on whether to increase the Bank Rate, which currently sits at a historic low of 0.1pc. 

This evening HSBC plans to increase the interest rates on 28 of its mortgage deals. This is the second time in a week the bank has made its loans more expensive. The previous increases came in the aftermath of the Budget last week.

Nationwide will withdraw all of its tracker loans overnight, until further notice. These mortgages automatically follow the movement of the Bank Rate. The building society has also increased rates on some first-time buyer and remortgage deals by up to 0.35 percentage points.

Meanwhile NatWest, which also raised its rates just hours after last week’s Budget, will increase the prices of its two and five-year deals tonight, including its range of green mortgages. 

The lenders have become the latest to remove their cheapest loans in recent weeks, ahead of the much-anticipated interest rate rise. 

Aaron Strutt, of Trinity Financial, a mortgage broker, said: “Many of our clients are keen to swap to new deals because they are worried about their repayments rising.  

“The issue is many of them are part way through their two or five-year fixes so they cannot take a new deal without paying a fee. Some are paying the early repayment charges anyway, just to lock into cheaper long term rates.”

There are now 30 sub-1pc mortgage deals on the market, according to analysts Moneyfacts. This is a fall of almost 80pc from the 131 available at the beginning of October. 

About 2.2 million borrowers on standard variable rate deals or tracker mortgages will see almost immediate increases to their monthly payments if the Bank of England does increase its Bank Rate tomorrow.

Whilst homeowners on fixed-rate mortgages will initially be shielded from any increase, these borrowers could see a big jump in costs once they come to remortgage. Last week a borrower with a 20pc deposit could take out a two-year fixed rate loan paying 1.24pc, but this has now risen to 1.64pc – a jump of almost a third. 

First-time buyers have also suffered. Last week the average rate for a borrower with a 5pc deposit on a two-year fixed mortgage was 2.45pc, according to Defaqto, a data analyst. It now sits at 2.69pc.