Mortgage rates hit three year high and warnings of more hikes to come

Mortgage rates hit three year high and warnings of more hikes to come Industry experts Moneyfacts says the average five-year fixed rate mortgage has risen to more than 5.90% - even before an expected Bank of England rate hike in the coming months Mortgage rates have hit a three-year high - in a further blow to millions of borrowers. Figures from industry experts Moneyfacts show the average five-year fixed rate deal had increased to 5.92%, the highest since mid-October 2023. The average two-year fixed residential mortgage rate is at its highest since this April, at 5.88%. The rise comes amid expectations of a Bank of England rate hike, as well as higher government costs which impact “swap” rates between lenders. Both have been driven by the ongoing war in the Middle East, with its fall-out on global oil prices and inflation. And there could be more pain to come amid forecasts that the Bank of England will announce rate hikes in the months ahead. Rachel Springall, finance expert at Moneyfacts, said the average borrowers taking a typical two year fixed rate mortgage was now paying around £150 a month more now compared to if they had taken it out at the start of this year. “There were notable rate hikes last week from the major brands, some increasing for the second time this month to catch up with rising swap rates,” she explained. “The average two-year fixed rate is approaching its highest point seen this year, rising by over 1% since the start of March, and the average five-year fixed is now back to highs not seen since October 2023, the month after the infamous mini-Budget. “In the months ahead, remortgage business is expected to boom, so any borrower coming off a cheap fixed rate must seek advice. It could be a good opportunity for lenders to consider extending their product transfer windows while rates remain volatile, giving existing customers more time to secure a new deal while also helping lenders protect their mortgage books.” It comes amid reports that mortgage borrowers are contacting brokers six months early as they are “worried about payment shock” over rate rises. Data from industry body UK Finance says 1.8 million fixed deals ending this year, after 1.6 million last year. Nick Gatti, mortgage adviser at NG Mortgages, said: “We’ve seen a surge of customers getting in touch five, six, even seven months before their current fixed rate ends. Especially those coming off sub-2%, five-year fixes. “It’s not the wrong thing to do either. Especially with a lot of lenders reducing the lead time on their product switches to three or four months. "The plan for most now seems to be get everything prepped as early as possible, lock in a new rate at bang on six months and then, most importantly, watch the market.”