Britons could face mortgage rates hikes once again as property experts warn that rate cuts have "levelled off".
Homeowners are being warned that mortgage rates risk climbing further if markets firm up predictions on the Bank of England (BoE) continuing to bump up interest rates to as high as five per cent.
Investors suggest that the central bank will lift its key lending rate by a quarter point on Thursday to 4.5 per cent.
In anticipation of higher rates, some lenders have already started to slowly increase the price of home loans again.
Some lenders have already started to slowly increase the price of home loans again
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“We’ve seen several of the mainstream lenders actually put rates up,” said Andrew Montlake, managing director at broker Coreco.
“They do think that, with stubborn inflation and the BoE probably going to put rates up again, that actually swap rates are still staying where they are. They don’t seem to be falling anymore.”
According to Uswitch, the six biggest mortgage lenders increased rates slightly on the average two-year fixed-rate mortgage with a 75 per cent loan-to-value ratio - lifting the rate by 0.16 per cent to 4.65 per cent last week.
Normally, mortgage costs would rise along with the central bank’s key rate.
But mortgages have been falling despite rising BoE rates, because mortgages surged during the financial panic triggered by Liz Truss’ budget.
Aneisha Beveridge, head of research at estate agent Hamptons International, said: “Generally if the BoE have to hike further than markets currently expect, then there is a stronger chance that mortgage rates will have to rise a little bit to compensate.
“The pace of (mortgage) rate cuts has levelled off. I think that’s widely because it was believed that the BoE was coming towards the end of its hiking cycle.”
Investors are now bracing for the increase on Thursday, as well as again in either June or August, with a more than 50 per cent chance that rates will peak at five per cent in September.
The six biggest mortgage lenders increased rates slightly on the average two-year fixed-rate mortgage
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“I don’t think it would take much of a hawkish shift in market pricing to cause mortgage rates to rise again,” said Andrew Wishart, property market economist at Capital Economics.
“The five-year swap rate already looks unusually low given bank rate cuts aren’t yet on the agenda.”
He added that the policy being “even higher for longer at 4.5 per cent could push mortgage rates up from where they are now”.
