Mortgage rate increases becoming the ‘new normal’

Mortgage rate increases becoming the ‘new normal’

The cost of borrowing is anticipated to rise further, according to mortgage brokers, with increases in rates expected to become the “new normal”.

Analysis by Moneyfacts has found average mortgage rates had risen for a third consecutive month in October, while the number of available products had fallen to a ten-year low.

According to Chris Sykes, mortgage consultant at Private Finance, rate increases are becoming the “new normal”.

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Mr Sykes said: “Mortgage rates are going up across the board and this could begin to put the brakes on house price increases in the coming month.”

Virgin Money increased its fixed rates last week (October 13) by up to 0.25 per cent on selected 65 per cent and 85 per cent LTV products, and by up to 0.35 per cent on selected 75 per cent LTV products.

NatWest has also increased rates from last week (October 16) across a range of two- and five-year fixed rate products.

Anthony Rose, director at LDNfinance, said: “It does appear that the current trajectory on rates is an upward one at the moment and this trend is expected to continue in the short term.”

Joanne Chapman, director and adviser at Plus Financial, likewise said “all the signs” were pointing towards further interest rate rises by lenders.

Ms Chapman said: “Right now, it is difficult to say by how much but I suspect there will be steady incremental rises over the next two quarters.”

But brokers have recently questioned the fairness of sudden mortgage rate changes after being affected by increases with very little notice, such as a four-hour period at the end of a working day.

Kate Davies, executive director at IMLA, at the time said rate changes were a sign of lenders adopting different ways of managing demand.

LDNfinance’s Mr Rose said increases in rates as a way of managing business levels could be an “ongoing issue” for the market.

But he added: “It’s important to recognise that rates are still very low on a historical basis and affordability for most clients should still be very strong.”

While some lenders have raised rates, others have bucked the trend, with Coventry for intermediaries announcing last week it had reduced rates on standard residential products within its two-, three- and five-year ranges up to 80 per cent LTV.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said service levels were still in a “comfortable position” after offering 90 per cent LTV products for two days.

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