Halifax is the latest lender to announce a hike in mortgage rates, with the increase kicking in from this week (June 24).
The increase will see the lender’s 60 per cent LTV remortgage rate rise to just over 3.24 per cent - an increase of almost 300 per cent from last year’s 0.83 per cent rate.
Brokers, while not surprised by the increases, have highlighted the strain this will put on people already struggling with rising inflation, which hit a fresh 40 year high of 9.1 per cent this week (June 22).
Advias managing director, Edward Checkley said: “It is unsurprising that rates are increasing to this level when 5-year swaps, the market cost of fixed money, have gone from 0.51 per cent last year to 2.74 per cent - up from 2.15 per cent one month ago. Halifax's current 5-year remortgage rate at 2.71 per cent is less than the market cost hence their need to increase rates.
“Market forces are at play and lenders are repricing with large increases to avoid being caught out and ensure products are profitable, or indeed not loss-making.”
Many brokers agreed that this increase will not be the last, warning borrowers that they should be prepared for tough financial decisions in the months ahead.
Jonathan Burrridge, founding adviser at We Are Money said: “When I started in the industry, the interest rate at the mortgage lender I was working for was 15.75 per cent. That is no solace for those borrowers looking at reviewing their ultra-low fixed rate deals in 2022, but, we have seen far, far worse.
“I am afraid that what some saw at the start of the year is now coming to fruition and this is the start of a period of difficulty for many. Borrowers should be looking at their options, understanding their budgets and planning for the next few years. That will mean there will be tough lifestyle decisions to make for some. It is not a time to think it will blow over.”
Echoing this, Harmony Financial Services director, Imran Hussain said: “We have had over a decade of low rates, and people got too comfortable. We are now getting a sharp kick in the proverbial with rates now changing rapidly and approaching what will be new norms going forward.”
Shaw Financial Services founder, Lewis Shaw said: “It's almost certain they're pricing in further base rate rises down the line in August, especially as a Bank of England MPC member recently spoke of needing a more robust policy to try and contain inflation. Given the inflation number out Wednesday, with predictions it'll hit 11 per cent, there's no wonder mortgage lenders are trying to get ahead of the curve.”
Earlier this week, TSB also announced increase to their residential range of mortgage rates while Virgin Money wrote to brokers to inform them that all fixed rate products have increased by 0.40 per cent.
