Borrowers left disappointed as mortgage costs climb again

Anyone waiting patiently for mortgage rates to fall has been dealt an unwelcome surprise. Nearly all of the UK's major lenders have announced increases in the cost of home loans in recent days, and analysts are unsure whether the run of rises is over. For borrowers whose fixed deals are coming to an end, the message from experts is blunt: do not wait and hope, act now.

The numbers explain why. Someone whose five-year fix is expiring faces paying more than £5,000 a year extra on their next deal under a typical rate, assuming they borrow the same amount. Moneyfacts put the average new two-year deal at 5.65% as of Tuesday, with the average five-year product at 5.70%. Even those securing a deal now are paying more than they would have just weeks ago: a borrower on a typical two-year fix borrowing £250,000 is likely to pay £120 more a month than if they had locked in the deal at the start of March, when the US-Israeli strikes began.

The causes are largely global and governmental. Since the Iran war began, economic uncertainty has pushed up the cost of borrowing worldwide, and Bank of England governor Andrew Bailey told MPs on the Treasury Committee that UK borrowers had seen the biggest rise in mortgage rates of any G7 country apart from Japan since the conflict started. Closer to home, government borrowing costs have been climbing too. A 30-year bond sold by the UK on Tuesday carried a yield of 5.82%, the highest since 1998, and those debt costs feed directly through to mortgage pricing.

The uncertainty is arguably as troubling as the increases themselves. "The difficult bit is knowing whether this is the end or just the first round of increases," said David Hollingworth of broker L&C. Aaron Strutt of Trinity Financial echoed the caution, noting that while he hoped the rises would stop for a while, there were no guarantees, and that multiple small price rises add up and ultimately deter people from buying homes.

There is one practical step many borrowers overlook: most lenders allow you to lock in a new deal up to six months before your current one ends, with the option to switch if costs fall before it kicks in. That effectively gives you a free option on today's rates without losing out if they improve. As Rachel Springall of Moneyfacts put it, borrowers who expected rates to drop in the coming weeks have had their hopes dashed, and it remains essential not to delay seeking advice to navigate the mortgage maze.

There is also a warning sign in the wider data. Bank of England figures show more buyers taking loans with smaller deposits, leaving them more exposed to rate changes. The proportion of mortgages where the loan exceeds 90% of the home's value has reached its highest level in 18 years. High loan-to-value borrowing magnifies the impact of every rate rise, both in monthly costs and in what lenders will offer.

For readers, the takeaway depends on where you stand. Renters hoping rising costs would ease the case for buying may find the opposite, as Strutt's point about small rises deterring buyers suggests. Homeowners coming off older, much cheaper five-year deals face a further blow, though it is worth remembering rates remain some way short of the peaks of recent years, and what you can borrow and at what rate depends heavily on your circumstances. The sensible move, on the evidence here, is to plan early, seek advice, and secure a deal rather than gamble on a fall that has so far failed to materialise.