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Homeowners brace for 'big mortgage reset' after average rates rise again
12 June 2023, 15:58
Average mortgage rates have increased again as homeowners prepare for a "big reset" within nine months.
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Around 2.6 million Brits are expected to have to pay thousands more back each year as interest rates continue to rise and the cost of living crisis takes its toll.
The rate on a new two-year fixed deal reached 5.86 per cent on Monday - up from 5.72 per cent a week ago and 5.33 per cent a month ago.
Meanwhile, five-year fixed deals leapt from 5.03 per cent a month ago to 5.51 per cent on Monday, according to financial experts at Moneyfacts.
It comes amid warnings that a "big reset of mortgages" is on the way as only a third of borrowers who are on cheap fixed-term deals have so far come off them.
A third of such households - around 3.2 million - are paying interest rates of 3 per cent or more, analysis by Capital Economics found.
It is expected to rise to 5.8 million but the end of next year.
"There's going to be a big reset of mortgages for the next nine months. Only a third has come through so far, two thirds is to come," a source told The Times.
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The Centre for Economics and Business Research said the increase in mortgage rates was expected to cost borrowers around £9 billion over this year and the next.
Londoners and those in the southeast face the biggest increases.
Santander and HSBC are among the banks to have withdrawn loans amid concerns that interest rates would continue to rise.
On Thursday last week, HSBC UK made the decision to temporarily withdraw mortgage rates available via broker services, to help to ensure the bank could stay within its operational capacity.
Its mortgages are now back on sale through brokers, although its rates have increased by between 0.10 percentage points and 0.45 percentage points.
Swap rates, which underpin the price of fixed-rate mortgages, have been climbing generally following expectations over inflation and several lenders have increased their mortgage rates in recent days.