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Mortgage rates: What the banks are offering following interest hikes

Aerial view of London streets and housing mortgage rates
The Bank of England raised interest rates to 5.25% on Thursday leading some banks to recalculate their mortgage rates for borrowers. Photo: Getty (Richard Newstead via Getty Images)

The Bank of England (BoE) raised interest rates on Thursday, the 14th consecutive increase and a 15-year high at 5.25%.

"If we stick to the plan, the Bank forecasts inflation will be below 3% in a year's time without the economy falling into a recession," said chancellor Jeremy Hunt. “But that doesn't mean it's easy for families facing higher mortgage bills so we will continue to do what we can to help households.”

Some banks have moved accordingly, recalculating their mortgage rates for borrowers, as inflation ramps up prices.

Generally speaking, tracker mortgages are linked to the bank base rate. Other rates depend on factors such as swap rates, or the fixed rate that the swap "receiver" demands in exchange for the uncertainty of having to pay a short-term rate, and market conditions.

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Around 1.4 million people in the UK are on a variable rate, and have seen prices ramp up and up to the tune of hundreds of pounds more per month over the last year, with the nod of the central bank.

People tend to go for a variable rate if they don't want to lock in a fixed rate deal when rates are high, believing the rate could drop.

Read more: Bank of England raises UK interest rates to new 15-year high

Standard variable rates (or SVRs) rise at the discretion of the lender.

"The prevailing view is that even when interest rates do drop they are unlikely to reach anywhere near the ultra-low levels that they were a during the pandemic and before," said Rosie Hooper, chartered financial planner at Quilter. "Therefore if you are coming up to the end of your fixed term it’s important to bear this in mind as opting for a short term fix in the hope things might be considerably better in two years may not materialise."

Here's the current state of play for UK mortgage rates following the BoE's latest hike:

Nationwide (NBS.L)

Nationwide, Britain's largest building society, hiked some fixed mortgages for new borrowers last month. It said it needed to increase fixed rates to ensure prices remain sustainable.

A recent case study on its website put these costs to customers:

A mortgage of £173,949.00 over a term of 31 years on an initial two-year fixed rate at 4.74% (fixed) would require 24 monthly payments of £893.18 and 348 monthly payments of £1,247.02 based on the bank's standard mortgage rate currently at 7.99% (variable).

Lloyds (LLOY.L)

After the last interest rate hike Lloyds passed on the costs to its customers in full and refused to rule out further changes.

Following today's move a two-year fixed rate deal will attract an initial rate of 6.52% until December 2025. After the initial period rates revert to 8.49%.

Barclays (BARC.L)

Barclays CEO CS Venkatakrishnan said recently that homeowners and renters are set for a "huge income shock" due to rate rises. He estimated that payments by mortgage holders and tenants will take a chunk of between 28% and 30% out of their income, compared with 20% in previous years.

Rates on Thursday stood at 5.34% for a five-year fixed rate mortgage, with a follow on rate of 8.49%. Two-year fixed rates were at 8.3%.

Halifax

Halifax Intermediaries also upped fixed rates last month. At the time, to get a two-year fixed rate mortgage with a £350,000 property and a £90,000 deposit, the initial rate was 5.81%. After October 2025, the variable rate of 8.49% kicks in. Now the two-year rate has increased to 6.68%.

Now, a first-time buyer can expect an initial fixed-rate of 6.42%. After November 2025, the variable rate of 8.49% kicks in. The five-year initial rate is 6%.

HSBC (HSBA.L)

HSBC shifted its mortgage rates multiple times in recent months, pulling some deals as demand surged ahead of previous rate rises.

In July, the bank had a two-year fixed standard deal that came with an initial interest rate of 5.94% fixed until October 2025, followed by a variable rate "currently" at 6.99%. As of Tuesday, that rate is up to 6.14%.

For the same deal but three years, the initial interest rate stands at 5.99%, up from 5.44% before jumping to the variable rate of 6.99%.

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