TSB mortgage rates hiked AGAIN as home loan chaos continues
TSB raises fixed mortgage rates AGAIN as mortgage chaos continues with five-year average terms now over 6%
- Rates continue to rise as the market expects further rate hikes from the Bank of England
- Speed of increases means borrowers can pay £120 more for a month later
TSB is the latest mortgage lender to raise its interest rates as borrowers continue to battle rising monthly payments.
In an email to brokers today, the bank announced that several of its two-year, fixed-rate mortgages are up 0.4 percent starting tomorrow (Wednesday, July 5).
These changes apply to both residential and buy-to-let products, and some five-year buy-to-let rates are also increasing by 0.35 percent.
Mortgage scarcity: TSB is the latest major lender to drive up fixed mortgage rates, causing even more pain for borrowers needing a new loan
Those in the process of getting a new mortgage should submit their application no later than midnight on Tuesday, July 4 to lock in current lender rates before the increases take effect.
Last month, TSB announced less than four hours’ notice for the cancellation of some of its mortgages.
On June 5, TSB offered a two-year fixed rate of 5.34 percent to those with a 25 percent down payment or equity. The same rate now stands at 5.99 percent and is likely to go to 6.39 percent tomorrow.
This means that if someone took out a £200,000 mortgage with the lender more than 20 years ago, their monthly payments will have been £1,357.76. As of tomorrow someone taking out the same mortgage would pay £120.46 more or £1,478.20.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘The TSB increases are a sudden leap from others in the market.
“The majority of the major high street lenders have already raised their rates significantly, which means they are currently outside the best bargains.
“I still think we could see further increases in the future if substantial progress is not made in reducing inflation.”
The average mortgage interest rate with a term of five years has risen above 6 percent for the first time since November last year. Borrowers who take out a five-year fixed rate now pay an average of 6.01 percent, according to Moneyfacts, up from 5.97 percent yesterday.
Excluding the period around last autumn’s mini budget, December 2008 was the last time that rates were this high.
The news from TSB is the latest in a tumultuous month for home loans that began when higher-than-expected inflation rates in May shocked the market.
Lenders raised rates again ahead of the Bank of England’s decision to raise its base rate by 0.5 percent on June 22, bringing it to a 15-year high of 5 percent.
Market expectations that base rates could rise to 6 percent over the next year have led to further increases as lenders keep pace with swap rate movements.
Swaps give an indication of where interest rates are likely to be at some point in the future.
The two-year swap rate is currently at 5.87 percent and has risen 0.82 percentage points in the past month and 3.29 percentage points in the past year.
Swap rates – the money market rates that lenders use to set fixed-rate mortgage prices – have risen significantly in recent weeks
Historically, shorter-term mortgages have come out cheaper as lenders have been more comfortable dropping rates on shorter deals — but five-year mortgages are currently cheaper than two-year mortgages.
However, the market now expects interest rates to continue rising in the near term and then hopefully fill up later. Currently, the five-year swap rate is 5.06 percent.
Last month, the government and mortgage lenders announced a package to help borrowers with rising costs, including a year of repossession protection and the chance to move to an interest-only deal for six months without impacting credit scores.
However, lenders are struggling to get to grips with the details of the new ‘mortgage charter’, leaving mortgage holders in limbo.