UK Mortgage Rate Hikes Hit 750,000 Households Amid Global Uncertainty

More than 750,000 households in the UK are bracing for mortgage rate hikes as cheaper sub-3% rates disappear from the market. According to Bank of England figures, these households have fixed-rate deals set to expire this year with interest rates below 3%. With the average homeowner facing an average repayment increase of around £170 per month, many will struggle to cope with the rising costs.

Lenders began increasing mortgage rates in July due to renewed unrest in the Middle East, which has driven up oil and energy prices. This has led to a surge in inflationary fears, potentially causing base rate increases by the Bank of England. As a result, swap rates have increased, making it more expensive for banks to borrow money.

With nearly 90% of mortgage deals returning after lenders withdrew them earlier this year, some lenders are now cutting rates again. However, the average two-year fixed rate has risen to 5.63%, while the average five-year fix has increased to 5.66%. This means that many homeowners will face significant increases in their monthly payments.

Experts warn that borrowers should look for a new deal early, around six months before their current one ends, to limit the damage. While some lenders, such as NatWest, have made rate cuts across their new business range, it's uncertain what will happen in the mortgage market in the longer term.