Mortgage rates have risen following Labour's first Budget and many of the remaining sub-4% rates from the main high street lenders are now disappearing.
The increases come despite the Bank of England cutting interest rates from 5% to 4.75% last week.
The move follows Rachel Reeves's first Budget, which announced a series of policies that would cost almost £70 billion, half of which would be paid for by tax hikes and greater tax compliance.
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According to the Office for Budget Responsibility (OBR), the other half is funded by a £32 billion (1% of GDP) a year increase in borrowing, "one of the largest fiscal loosenings of any fiscal event in recent decades".
It means that the OBR has increased its inflation forecasts - the cost of goods is not projected to come down to the Bank of England’s 2% target until 2029 - and also added 0.25% to its forecasts for interest rates over the next five years.
Gilt yields have increased and as a result, markets are now pricing in one, rather than two, interest rate cuts this year - and mortgage rates have gone up.
Within hours of the fiscal event, Virgin Money announced rate increases of up to 0.15% across its range. Some smaller mortgage lenders have withdrawn deals and Santander, HSBC, Nationwide and TSB have all hiked rates this week.
They all boasted best buy rates below 4% at one point in recent weeks. Only Allied Irish Bank and Danske Bank currently offers rates below 4%.
David Hollingworth, associate director at L&C Mortgages, said: "A number of lenders managed to hold fixed rates below 4%, until now. As sharper rates have fallen away an air of inevitability was building and now all major UK lenders’ fixed rates have once again edged back above 4%.
"Unwelcome as it is for borrowers, it’s important to note that there’s no sign of rates skyrocketing as they have in recent years. The Bank of England base rate is still expected to fall over time, but markets are questioning if the pace will be as rapid."
According to Moneyfacts, the average two-year fixed-rate mortgage is priced at 5.48% as of 14 November, up from 5.39% 10 days ago.
The average five-year deal comes in at 5.21% compared with 5.06% three weeks ago.
Mortgage rates had generally been tumbling during the summer and into the autumn - spurred on by the Bank reducing rates from 5.25% to 5%, the first rate cut since 2020 - on 1 August.
Nationwide became the first major lender to offer a sub-4% deal since February when it unveiled a 3.99% five-year mortgage in July. Coventry Building Society, HSBC, Lloyds, NatWest, TSB and Virgin Money have also released sub-4% five-year rates.
But Budget uncertainty last month meant some lenders including Coventry BS, Santander and TSB put rates up, and this has continued since Reeves gave her Budget speech last Wednesday.
There is one more Monetary Policy Committee meeting to set interest rates this year on 19 December but it is unclear if the cost of borrowing will be cut and how lenders will respond.
Hollingworth advises borrowers considering a fixed-rate option "to move quickly to secure a deal as we’re seeing some rates withdraw with very little notice". Some lenders are also reducing their "lock in" windows meaning homeowners have less time to switch to a cheaper rate.
So, will mortgage rates fall further this year, or has the flurry of rate cuts really come to an end? Here's everything you need to know.
Which mortgage lenders have raised rates?
HSBC announced a host of changes to its residential mortgage products today. Most of the changes were rate hikes. However, a handful of rates fell, such as its two-year fixed fee saver at 60% loan-to-value.
Meanwhile, Coventry BS is increasing all fixed rates for new and existing borrowers (for residential and buy-to-let). It is closing all offset fixed-rate deals with no fee.
Halifax simultaneously hiked and cut a selection of its mortgage rates on 1 November.
Nicholas Mendes, mortgage technical manager at the broker John Charcol, comments: "These adjustments align with similar moves from major lenders such as Barclays, Santander, and NatWest, who have all reacted to fluctuations in swap rates. While these repricing changes signal short-term market volatility, they don’t necessarily indicate a long-term trend."
What is the forecast for mortgage rates?
The Bank of England cut interest rates for the second time this year from 5% to 4.75% during its latest Monetary Policy Committee meeting on 7 November. A further cut was previously forecast for December, but this has now been reversed.
Laith Khalaf, head of investment analysis at AJ Bell, comments: “The sizeable fiscal loosening announced by the chancellor has prompted markets to pretty much rule out two interest rate cuts this year."
However, he thinks that the Budget, which looks to have materially changed the inflationary path, "may well make the Bank’s rate-setters sit on their hands for the time being".
According to Khalaf, mortgage rates could creep up again in the short term, due to a rise in gilts. "However, rates are still more affordable than they were, with some fixed rates coming in under 4%. That at least gives borrowers a better base if rates do tick up a bit," he adds.
But, the overall trend is for mortgage rates to fall over the long term, given another interest rate cut is expected this year, and more to come next year. The latest OBR forecast sees interest rates falling to 3.5% from 2027 onwards.
But how far mortgage rates fall also depends on swap rates. Swap rates are based on what the markets think interest rates will be in the future. They influence the price of fixed-rate mortgage deals, so if swap rates go down, mortgage rates tend to go down. If they go up, so do mortgage rates. Soaring swap rates were partly to blame for rising mortgage rates earlier this year, even though there had been no change to the base rate.
Bear in mind that the mortgage rate is just one aspect of a deal. Borrowers need to watch out for extra mortgage costs as some deals have high fees attached that could offset any savings compared with other deals with higher rates but lower charges. For example, many of Barclays' mortgage deals have fees in excess of £1,000. Several of its products come with a price tag of £2,495.
What's mortgage availability like?
Mortgage product availability has dipped whenever rates have surged. In the wake of Liz Truss's mini-Budget in 2022, not only did two and five-year fixed deals go up by more than a percentage point, 1,700 lender products - 40% of the market at the time - disappeared from sale in the space of a week.
In the summer of 2023, when rates rose even higher, almost 800 deals - 10% of the market - were withdrawn by lenders.
The number of mortgage deals on offer has dipped in recent weeks, following the increase in rates. Last month, there were 6,645 options, according to Moneyfacts. Today (14 November) there are 6,297 mortgage products available.
Should you fix your mortgage?
If the last two years of rises and falls have told us anything, it's that predicting falls in mortgage rates is not an exact science. So, if you're one of the 1.5 million households whose fix is expiring this year, should you opt for a fixed deal?
According to Jo Jingree, MD of mortgage advice firm Mortgage Confidence, the answer is yes. She told MoneyWeek: "If your fixed rate is ending, I would always recommend securing a new rate now even if rates are falling, as it’s impossible to know how long that trend will continue for and rates could start to rise again at any time.
"We have seen a very fluctuating market over the last few months so secure and monitor is my advice."
She was echoed by Mendes at broker John Charcol, who urged people to not take a "wait and hope approach". He said remortgagers can lock in a rate up to six months before their deal is set to expire, and jump to another deal with that lender if rates go down.
However, do double-check the time window for locking in a new deal, as some lenders have reduced theirs to just three or four months recently.
What about variable mortgage rates?
About 2.2 million homeowners are on variable-rate mortgages, which are linked to the Bank of England’s base rate. The average standard variable rate (SVR) is an eye-watering 7.95%. The average two-year tracker costs 5.71% - up from 5.67% last month.
Those on a high SVR would be wise to switch onto a fixed rate now. Even if fixed rates fall this year, the money they save from getting rid of their expensive SVR earlier could make it worth it.
Analysis by Compare the Market reveals homeowners on an SVR mortgage could save up to £330 a month by switching to a fixed-rate deal, the equivalent of £3,960 a year. This is based on moving from an average SVR to an average five-year mortgage rate.
What about buy-to-let rates?
Last summer, buy-to-let mortgage rates were pushing 7%. They have since come down from these sky-high levels. As of 14 November, average buy-to-let rates were 5.32 for a two-year fix, and 5.43% for a five-year deal, Moneyfacts said.
But, they have ticked up over the past week following the Budget. For example, Coventry BS hiked all of its buy-to-let fixed rates for existing and new customers.
These high buy-to-let mortgage rates - coupled with a new 5% stamp duty surcharge and less generous mortgage interest tax relief - are making things tough for landlords. According to the trade body UK Finance, the buy-to-let market contracted for the first time in terms of outstanding mortgages, from 2.039 million mortgages in Q1 2023 to 1.98 million in Q1 2024.
There is now a record number of previously-rented homes being listed for sale, as financial strain pushes landlords to sell up.
Mortgage support available
Mortgage rates are much higher than when many people would have last remortgaged. Millions of homeowners will be coming off rates as low as 1% or 2%.
If you’re struggling to make your mortgage repayments, the good news is that lenders representing 90% of the mortgage market have signed up to the government’s mortgage charter. They include the big banks like Halifax, HSBC and Santander and building societies like Nationwide, Leeds and Skipton.
The charter is a series of support measures intended to help those in difficulty. Borrowers will be able to make a temporary change to their mortgage for six months to give them some breathing space, such as switching to interest-only payments or extending their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within six months by contacting their lender.
Around 1.4 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to data from the City watchdog.
Meanwhile, there is a 12-month delay before repossession proceedings can start against those who have missed payments. Regardless of whether your lender has signed up to the charter, all lenders also have a range of measures in place for customers experiencing difficulties.
Should I overpay my mortgage?
If you’ve got some spare cash and you're on a low rate, overpaying your mortgage can be a good way to protect yourself before your mortgage deal expires and you have to remortgage at a higher rate.
Our mortgage overpayment calculator shows how your monthly repayments will change and help you decide if it is worth it.
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