Halifax Mortgage Rates Increase, Exceeding 7%, as Market Awaits Inflation Data
Halifax has recently raised its mortgage rates by up to 0.6 percentage points. This change affects several fixed products, with some now exceeding 7%. Lenders continue to adjust rates based on the expectation of further rate increases. These changes impact home buyer loans, including those for first-time buyers. For example, a two-year fixed rate mortgage with a 40% deposit has increased from 6.07% to 6.67%. Similarly, a two-year fix with a 10% deposit has risen from 6.62% to 6.99%. On a £200,000 mortgage over 25 years, this increase raises monthly payments by £47, from £1,365 to £1,412.
Currently, Halifax has two rates over 7% – 7.01% and 7.19% – both two-year fixes on new-build properties. Rising interest rates continue to burden borrowers as the market anticipates the Bank of England’s potential fourteenth base rate increase from its current 15-year high of 5%. The average two-year fixed rate is currently 6.78% according to Moneyfacts; this rate has remained stable for a few days leading up to the release of new official inflation figures. Earlier this month, the average home loan rate reached a 15-year high, surpassing the level seen during the fallout from the mini-Budget in October of the previous year.
Halifax is not the only lender raising rates, as Coventry has also increased rates on some of its mortgage products. Coventry’s new build residential rates have all increased, and it has withdrawn all its new business rates for buyers with a 20% deposit. Nicholas Mendes, mortgages technical manager at John Charcol, suggests that Halifax is taking a cautious approach, and it will be interesting to see how other lenders respond. Fixed rates have continued to rise following disappointing inflation data in May, which increased the likelihood of further base rate increases.
The impact of rising mortgage rates is expected to be significant, as around 1.3 million households will see their mortgages up for renewal between Q3 2023 and Q3 2024. Many of these households are currently on rates below 2%. Lewis Shaw, owner at mortgage broker Shaw Financial Services, warns that with the current interest rate environment, the outlook isn’t promising. The upcoming weeks and months may see a lot of pain for households facing mortgage payment hikes, which could potentially result in falling house prices. The hope is that tomorrow’s inflation data is positive; otherwise, the situation could worsen.
Lenders have observed an increase in mortgage defaults in the second quarter of the year. The Bank of England’s Credit Conditions Survey revealed a 30% increase in mortgage defaults. These lenders also anticipate an increase in borrowers missing payments in the coming months.
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