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Anxiety is ramping up once again in the housing market as the Bank of England (BoE) mulls action on inflation with interest rate rises on the horizon. The cost of a two-year fixed-rate mortgage is now above 6%, according to data provider Moneyfacts. Banks were left looking at their options as the volume of customers in need of support has increased, and people look to lock in better deals. The Resolution Foundation said over the weekend that mortgages are set to rise by £2,900 a year by 2024. Banks are making cautious moves as volatility in swap rate markets loom. Lenders typically use these rates to price mortgages. The next interest rate announcement is set to take place this week, with predictions that the BoE will raise rates higher than previously forecast from their current 4.5%, set last month, to up to 5.5%. Mortgage rates have been rising since data last month showed that inflation was not coming down as quickly as expected. Surging mortgage rates have been pushing record numbers of first-time buyers to take lengthier loans of around 30 years, in a bid to make their monthly payments more affordable. Read more: House prices cool as rising mortgage rates keep buyers away Just under a fifth (19%) of all loans taken out by first-time buyers in March were for 35 years or longer, while more than half took a loan of over 30 years, figures from trade body UK Finance show. Meanwhile, house prices are falling, according to Halifax. Prices in May saw the first year-on-year decrease since 2012. Mortgage approvals also slumped in April, according to the BoE. HSBC HSBC (HSBA.L) shifted its mortgage rates twice in the last two weeks, pulling some deals as demand surged ahead of the next round of interest rate news. The bank said this was “to ensure that [it] can stay within operational capacity and meet customer service commitments.” Read more: Mortgage costs driving buyers to 35-year loans to keep payments affordable Last time HSBC withdrew from the mortgage market temporarily was in the aftermath of Liz Truss’s mini-budget in September, which was disastrous for the UK economy. Nationwide and Clydesdale Bank Nationwide (NBS.L), Britain’s largest building society, is also set to hike some fixed mortgage rates for new borrowers. It said it needed to increase fixed rates to ensure prices remain sustainable. It previously increased selected fixed-rate deals for new borrowing, too, while it reduced some rates on tracker mortgages. On Friday, it implemented increases of 0.7 percentage points. Clydesdale Bank also said it had pulled some deals due to high demand. Read more: More pain to hit homeowners as Bank of England set to rise interest rates Lloyds An analysis by the i paper found Lloyds has passed on costs of a mortgage rate hike in full to its customers, with the bank refusing to rule out future changes. Last month, the bank warned of a jump in mortgage arrears as interest rates crept up. Halifax and TSB Halifax Intermediaries also upped fixed rates about two weeks ago, with an increase of 0.82 percentage points. Meanwhile TSB has said it is hiking rates by up to 0.75%. Barclays Barclays (BARC.L) CEO CS Venkatakrishnan said recently that homeowners and renters are set for a “huge income shock” due to rate rises. He estimated that payments by mortgage holders and tenants will take a chunk of between 28% and 30% out of their income, compared with 20% in previous years. At the start of June the bank raised its rates, with the UK Residential SVR increasing from 7.74% to 7.99% and the UK BTL SVR will increasing from 8.74% to 8.99%. The bank has moved to pass the full rate rise onto its customers. What will the government do to help? Prime minister Rishi Sunak has said that there won’t be any extra help given to homeowners struggling with payments. Speaking on Good Morning Britain on Monday he said the government needs to “stick to the plan”. It comes following comments from the former deputy governor of the Bank of England, Sir Charles Bean, that protecting people with mortgages from the pain of interest rate increases would be “risky territory”. Watch: More mortgage costs rise with ‘worse to come’ as Bank of England base rate expected to reach 5.5% high next year Download the Yahoo Finance app, available for Apple and Android.This article originally appeared on Yahoo Finance UK at https://uk.finance.yahoo.com/news/banks-raise-mortgage-rates-anticipating-interest-rate-rise-101644403.html
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