Millions of UK Homeowners Face More Mortgage Misery as Cost of A Two-Year Fixed Deal Rises by £68 A Month
TEHRAN (FNA)- Millions of homeowners face more mortgage misery as average two-year fixed deals are £68 a month more expensive than two weeks ago.
Lenders have rushed to hike mortgage rates and withdraw offers after official figures released on May 24 showed that inflation had remained higher than predicted, raising fears that interest rates will need to increase further, The Daily Mail reported.
The latest round of rate increases will add thousands of pounds onto the annual bills of 1.5 million homeowners who need to remortgage this year, according to UK Finance, the trade association representing the UK banking and finance industry.
The average two-year mortgage deal is now at 5.72 percent, up from 5.34 percent on May 24, according to analysts MoneyfactsCompare.
For a homeowner with a 25-year mortgage of £300,000, the rate hike translates to an increase of £68 a month, or £816 a year, when they come to remortgage. Over the full two-year term, it will add an additional £1,632 in interest, calculations by broker L&C have found.
Five-year fixed rates have also increased and now sit at 5.41 percent after climbing from 5.01 percent two weeks ago.
Andrew Montlake, of mortgage broker Coreo, says, "These hikes show the current unpredictability of the mortgage market. Just as we thought we had entered a period of calm, it seems higher interest rates will be with us for the foreseeable future."
Inflation fell to 8.7 percent in April, slightly above the 8.2 percent figure experts predicted. As a result, the Bank of England is widely expected to raise its Base Rate from 4.5 percent to a peak of 5.5 percent over the coming months in order to slow runaway inflation.
Forecaster Capital Economics now suggests that mortgage rates will return to a similar level as last autumn, when five-year deals hit a 15-year high of 6.65 percent. Last week, lenders began to pull hundreds of mortgage deals in order to reprice them at a higher rate.
Sunday 4,686 residential mortgage deals were available, down from 5,235 on May 24. Among those to reprice were Santander, Halifax and Leeds, who hiked their rates by 0.43, 0.3 and 0.8 percentage points.
On the same day, The Co-operative and Platform bank withdrew their entire mortgage range.
And last week TSB withdrew its ten-year fixed rate deals and hiked its two- and five-year fixes by 0.8 percent.
New data from UK Finance shows that one in five first-time buyers is now opting for a mortgage of more than 35 years in order to lower monthly payments.