Britain’s biggest lender is raising mortgage rates faster than the Bank of England


Homeowners will now pay hundreds of pounds more for new mortgages from Britain’s biggest bank after raising prices days before the Bank of England’s next interest rate decision.

Lloyds increased some of its fixed rate mortgages for new customers by up to 0.81 percentage points yesterday. Meanwhile, Halifax raised some two-year fixed rate transactions by up to 0.6 percentage points, five-year fixed rates by up to 0.3 percentage points and a ten-year loan by 0.25 percentage point.

A borrower with an outstanding loan of £250,000 would see their payments drop from £474 to £517 a month, costing them an additional £516 a year, based on their interest rate dropping from 3 to 3.81 pc.

The hikes are significantly higher than those made by the Bank of England last month, when it raised the Bank Rate by 0.25 percentage points to 1%.

The central bank will make its next interest rate decision next week – if the bank rate rises again, high street lenders usually follow suit within days and pass the increased costs on to borrowers.

Mortgage rates rose as households struggled with near double-digit inflation. The average two-year fixed rate is now 3.28%, down from 2.65% in March, while the average rate for a five-year deal fell from 2.88% to 3.4% over the course of the same period, according to analyst Moneyfacts.

Aaron Strutt of Trinity Financial, a mortgage broker, said the best interest rates disappeared within days as lenders raised prices.

He said: “Some of the rate increases are quite huge. The cheapest two- and five-year patches are now around 2.5%, but they will almost certainly get more expensive over the next few months.

“Lenders are constantly changing their rates and they don’t wait for the discount rate to go up to raise their prices. are unlikely to be around for long.”

Lloyds Bank said the new rates would affect new mortgages taken out and no rates for existing loans had changed.

Meanwhile, banks have neglected to pass on higher interest rates to savers, according to separate research. According to analyst Moneyfacts, nine out of ten easy-to-access savings accounts no longer meet the bank rate. This means that only 13% of savers currently earn more than 1% on their money. Many high street banks are still only offering 0.01pc interest to savers, experts said.


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