Halifax raises fixed mortgage rates with some exceeding 7% as market awaits latest inflation data

Halifax has raised its mortgage rates by as much as 0.6 percentage point with several of its products now fixed above 7 percent as lenders continue to price in the likelihood of further rate increases.

The changes apply to homebuyer loans, including those for first-time buyers. A two-year fixed rate on a 40 percent deposit was 6.07 percent, rising to 6.67 percent as of midnight July 19.

For those who take a two-year solution with a 10 percent deposit, the rate will increase from 6.62 percent to 6.99 percent.

On a £200,000 25-year mortgage, the increase increases monthly payments by £47, from £1,365 to £1,412.

The lender currently has two rates above 7 percent: 7.01 percent and 7.19 percent, both fixed for two years on new construction properties.

Borrowers continue to be hit by rising interest rates, as the market now bets on the Bank of England raising its base rate for the 14th time from its current 15-year high of 5 percent.

The two-year average fixed rate is 6.78 percent according to Moneyfacts and has been holding steady for a couple of days ahead of the new official inflation figures.

Earlier in the month, the average rate on home loans hit a 15-year high, surpassing the level reached at the peak of the mini-budget fallout in October last year.

The Bank of England made its 13th successive base rate hike last month after persistently high inflation in May prompted the Monetary Policy Committee to continue its efforts to lower the figure.

Halifax isn’t the only lender raising rates, Coventry has also raised rates on some of its mortgage products.

All of the building society’s residential new construction rates have increased and it has withdrawn all of its new commercial rates for buyers with a 20 percent deposit.

Nicholas Mendes, technical manager of mortgages at John Charcoal, said: “While the start of last week saw a small decline in interchange rates by the end of the week this trend has reversed, markets are trying to guess if the ONS inflation figures will be published”. on the 19th they have lowered or remained continually stubborn.

“Halifax is clearly being on the side of caution, it will be interesting to see how other lenders react up front as well.”

Fixed rates have continued to rise since disappointing May inflation data raised the likelihood of further base rate hikes.

Modupe Adegbembo, G7 economist at AXA Investment Managers, told This is Money: “Our view [on inflation] It is not very different from the expectations of the markets

“We think the CPI will be at 8.1 percent, but core will remain at 7.1 percent and we think the BOE will rise 25 basis points. Any upside surprises will see a 50 basis point rise, and if that happens, you’ll see a further increase.” raise mortgage rates.

The impact of rising mortgage rates is expected to be significant, as about 1.3 million households will see their mortgages renewed between Q3 2023 and Q3 2024, most of which are currently at rates for below 2 percent.

Lewis Shaw, owner of mortgage broker Shaw Financial Services, said: ‘With the current interest rate environment, the outlook is not good.

‘With thousands of households renewing their agreements in the coming weeks and months and facing increases in their mortgage payments, there is inevitably a lot of pain that has yet to be felt.

‘This could easily manifest itself in falling house prices; by how much no one can accurately predict.

“We have to hope that tomorrow’s inflation data is positive, otherwise things could get worse.”

Lenders saw an increase in mortgage defaults during the three months to the end of June and expect more borrowers to default in the coming months.

Lender’s responses to the Bank of England’s Credit Conditions Survey revealed a 30 percent increase in mortgage defaults in the second quarter of the year.