Average mortgage rates jumped 0.5 percentage point for the month, and home loan interest rates hit a high not seen since the mid-2010s.
Five-year fixed rate deals now average 3.89 per cent, up 0.52 percentage points from June and the highest rate since November 2014, according to Moneyfacts.
This means someone taking out a £300,000 mortgage today could pay £84 more each month than someone who had their rate cut in June.
Big bills: Someone taking out a £300,000 mortgage today will pay an average of £84 a month more than if they took out the same deal in June
And homeowners coming to the end of fixed deals can be hit with higher monthly bills when they come to remortgage, especially if they haven’t built up enough equity in their home to raise their loan-to-value ratio and secure a cheaper rate.
In 2017, average five-year fixed rates were just 2.85 percent, down 1.04 percentage points from today.
The average monthly payment on a five-year fixed mortgage of £300,000 on a 25-year term would have been £1,399 in 2017, but someone taking out the same mortgage today would pay £166 more each month at £1,565.
The total amount of interest they will pay over a fixed term will rise by almost £10,000, from £83,960 five years ago to £93,921 now.
Meanwhile, the average two-year fixed-rate mortgage also rose to its highest level since 2013 this month.
According to Moneyfacts, the standard rate is now 3.74 percent, up 0.49 percentage points from June.
Growth: Rates rise to record highs, leading to concerns over remortgaging costs
This time in 2021, the average two-year fixed rate was 2.55 percent and the average five-year fixed rate was 2.78 percent, 1.19 and 1.11 percentage points lower than today’s rates, respectively.
Chris Skyes, CTO of mortgage company Private Finance, said: “Based on the deal now, customers will most likely end up with a higher interest rate than they have been used to paying for years.
“The only situation I’ve seen recently where I get a customer a better rate is when they originally had a 95 percent loan-to-value and now it’s a much lower loan-to-value, so they’re benefiting from that, or where they used to be in they had very special circumstances, such as bad credit or a very complicated income, so they had to go to a specialist lender, and now they can go to a regular one.
While he suggests other ways to save on your mortgage, including extending the term of the deal or making the amount interest-only, he warns that these could cost more in the long run.
“My honest financial advice is to stick to payments if you can,” Sykes said.
Standard variable rates also rose, according to Moneyfacts, topping 5 per cent for the first time in 13 years.
After rising 0.15 percent this month, the average SVR now stands at 5.06 percent, up 0.66 percentage points from December 2021, when it was 4.4 percent.
How to reset
Buying a home is the biggest purchase most people make. Most require a mortgage to do this and will breathe a sigh of relief when it is sorted.
But time is running out, and with the UK’s favorite mortgages being two- and five-year fixed rates, many homeowners are finding their deal coming to an end and it’s time to remortgage sooner than they think.
At this point, it’s time to re-immerse yourself in the world of mortgages, which many of us know little about – and with interest rates on the rise, it’s important to make sure you remortgage correctly and move to the best possible new fixed rate or other deal.
The Bank of England raised the base rate from 0.1 per cent to 1.25 per cent within six months, while figures from L&C recently showed that the best two-year fixed rate mortgage had more than trebled.
Our guide explains what you need to know about a remortgageincluding whether to move bank or building society, why using a broker makes sense, how to revalue your home, why you may find yourself in a better value for money category, and thinking about how long to fix your mortgage for this time round.
Increase ‘will not cause widespread financial problems’
Despite these increases and the ongoing cost of living crisis, Andrew Wishart, senior property economist at Capital Economics, says we are unlikely to see re-mortgaging push significant numbers of homeowners into financial difficulty.
This opinion is supported by the Bank of England. The July Financial Stability Report said that even after adjusting for rising costs of living and interest rates, the share of households with very high debt service costs would remain well below financial crisis levels.
Those whose two-year fix expires in September 2023 will suffer the most, according to Wishart data.
Based on a 25 per cent mortgage on the average home, he predicted monthly payments would rise from £719 to £882.
Plan ahead: Experts advise borrowers to start looking for deals six months before they need to remortgage to try and get a better rate
Why are rates rising and what to do?
Fixed mortgage rates often rise and fall in a similar pattern to the Bank of England’s base rate, which has been gradually increasing since December in an attempt to curb inflation, but they are also influenced by other factors.
Eleanor Williams, financial expert at Moneyfacts, said: “There are many factors that go into fixed rate pricing rather than simply tracking the Bank of England’s base rate.
“Providers consider many factors such as financing, exchange rates, pricing pressure from other providers and the ability to maintain service levels, among others.
“Having said that, it is interesting to note that between December 2021 and July 2022 the base rate rose from 0.10 per cent to 1.25 per cent – an overall increase of 1.15 per cent.”
Last month The Bank of England raised the base rate to 1.25 percent, the fifth increase in six months.
At the time, the cheapest two- and five-year fixed-rate mortgages were more than 2.5 percent.
“It’s more important than ever for borrowers to get their mortgage under control, particularly as other household costs are also rising,” advised David Hollingworth of broker L&C.
“Those currently on a fixed rate will at least be protected from the rate rises that are happening now, but they will have to wait until the current deal ends.
“Rates can be secured up to six months in advance, so in today’s market it can be beneficial for borrowers to start reviewing early, allowing them to get ahead of further rate rises.
“They should consider any fees, not just zoning on the headline rate. Most lenders offer a number of options that can help with costs and fees, which will be more cost-effective for some, despite the slightly higher rate.
“Those who managed to lock in one of last year’s ultra-low rates may want to consider whether they can get the most out of this deal by overpaying a bit.
“Most agreements allow up to 10 per cent overpayment per year without incurring an early repayment fee, and although easier said than done, this can provide an opportunity to lower their mortgage while the rate remains lower, helping them prepare for a potential higher rate environment. ‘
The best mortgage rates and how to find them
Mortgage rates rose significantly as the Bank of England’s base rate rose rapidly.
If you’re looking to buy your first home, move or remortgage, it’s essential to get good independent mortgage advice from a broker to help you find the best deal.
To help our readers find the best mortgage, This is Money works with independent free broker L&C.
Ours mortgage calculator powered by L&C can allow you to filter deals to see which ones suit your home value and deposit level.
You can also compare different fixed rate mortgage lengths, from two-year fixed to five-year fixed and ten-year fixed, with monthly and total costs.
Use the tool linked below to compare the best deals including fees and rates. You can also run an online application at your own time and save it as you go.
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