Interest rate rumours fuel rise in mortgage costs

Speculation that the Bank of England is considering a base-rate rise is filtering through to the mortgage market, with a number of lenders starting to put up the cost of a home loan.

Bank governor Mark Carney recently said rates could rise within the next few months, and the market appears to be factoring this possibility into their pricing.

Dan Plant, of Moneysupermarket, says people looking to take out a mortgage should act swiftly if they want to secure competitive deals.

“It’s prime time for those looking for a mortgage as there are still some great deals on the market,” he says.

“However, the recent rate-rise speculation is starting to make providers cautious, and this is being reflected in their offers.

“We know choosing a mortgage can be confusing but if people can do it now, they avoid the risk of rates rising over the next few months.

“Many lenders allow mortgage holders to reserve rates available now for up to six months for a small fee, so even those who still have some time left on their current deals can benefit.”

Moneysupermarket pointed to First Direct as an example of a leading deal that has recently been repriced. The interest rate on its best two-year fix was 1.49% at the start of July but it has now risen to 1.69%.

Unusually, borrowers with smaller deposits might find themselves in a more competitive market than those with larger deposits available. The average interest rate for products requiring a deposit of least 40% is now 2.23% while the average rate for those who can stump up only 35% of the deposit is 2.09%.