Homeowners are being urged to check their current mortgage arrangements after analysis by MoneySupermarket revealed mortgage rates have started to rise<.
The news is especially bad for some homeowners following the recent announcements from a number of lenders that their standard variable rates (SVR) will increase from May. As a result, borrowers are advised to check if they could be taking advantage of a more competitive deal.
Here’s a look at the analysis, what it shows and what it means for homeowners.
The analysis shows that borrowers on two-year and five year fixes as well as those on two-year trackers will be finding themselves paying more each month because of rising rates.
The average rate for two-year fixes hit a low in October last year, falling to 3.82%, and its lowest point since April 2009. Since then, the average has risen to 4.15%.
Based on a mortgage of £150,000, this increase equates to £27.31 a month or £327.72 over the course of a year.
Five-year fixes also hit a low in January of this year, averaging at 4.57%. Since then, however, the average rate has crept up to 4.72%. On a £150,000 mortgage this will have increased monthly payments by £12.81 - or £153.72 over the course of a year.
Two-year trackers reached a low point in August last year at 3.37% and have since risen to 3.63%, costing borrowers an extra £20.91 a month – or £250.92 over the year.
Halifax, Bank of Ireland, Clydesdale and Yorkshire banks and Cooperative Bank have all announced SVR hikes in recent weeks.
SVRs are set by individual lenders - they’re not linked to the Bank of England’s Base Rate. This means that even though the Base Rate has been languishing at 0.5% for three years, many SVRs can still change.
The recent SVR increase announcements are being blamed on higher wholesale borrowing costs.
Clare Francis, mortgage expert at MoneySupermarket, said: "Mortgage rates are nudging upwards so anyone looking for a mortgage or whose mortgage deal will end in the next few months should act sooner rather than later to secure one of the current rates in case they rise further.
"Borrowers paying their lender's SVR should also reassess their mortgage arrangements. One of the consequences of the low base rate has been the fact that SVRs have been similar to the rates on new mortgage deals and in some cases the SVR has been even lower. As a result an increasing number of people have opted to stick with their existing lender and move onto the SVR when their fixed or introductory tracker or discounted period ended, as opposed to re-mortgaging elsewhere.
“However, as around one million borrowers are about to find out next month, many SVRs can rise even if base rate doesn't.”