UK households wake up to £204 rise in mortgage repayments

UK mortgage rates are still rising - with borrowers issued a stark warning. The average cost of a new fixed-rate mortgage is rising for borrowers, with the average new five-year deal was priced at 5.23%, according to Moneyfacts data this week.

The figure has increased every day since last Monday, when the average was 5.14%. It means that someone taking out a £300,000 mortgage today is paying £17 a month – or £204 a year – more than they would have had they signed up for an equivalent deal a week ago, assuming a 25-year term.

The average new two-year fixed-rate has also crept up and now stands at 5.51%. Andrew Montlake, the managing director of the mortgage broker Coreco, said: “An inflationary curveball on Wednesday could bring further pain for borrowers. If headline CPI comes in higher than expected, there’s every chance rates will continue to edge up.”

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David Hollingworth, an associate director at the broker L&C Mortgages, said: “If it’s in line with expectations, then potentially we won’t see any more impact from that.” Hollingworth said the situation was “not a rerun of the very high levels of volatility” seen in the last two years.

He said: “They can’t afford to hang around if they see a deal they are interested in.” A fixed-rate mortgage gives you a special interest rate for a fixed period time, meaning your monthly repayments will stay the same until the fix ends.

Money Saving Expert explained on its website: "There's no right answer to how long you should fix for – as so much depends on your own financial circumstances – it's not all about rate. The less spare cash you have to meet rate rises and the more you value budgeting certainty, the more you might hedge towards fixing, and fixing longer."

Sir Keir Starmer has conceded he was disappointed in the UK growth figures last week, but denied that his government’s budget was responsible for a recent rise in mortgage rates. The prime minister told journalists travelling to the G20 summit in Rio: “What we have done with the budget is to stabilise the economy and that, in my view, was the essential first step.

“As a result of that, the forecasts are for interest rates to go down, inflation to go down – you saw the figures around the budget,” he said, adding that mortgage rates were “individual decisions for the banks, but the interest rates will be coming down”.