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Borrowing blow

Banks hike mortgage costs as interest rate rise looms

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The cost of buying a home is rising (pic: Terry Murden)

Mortgage lenders have anticipated a likely rise in the cost of borrowing next week by hiking their rates to home buyers.

The Bank of England is expected to become the world’s first major central bank to increase rates in order to keep a lid on inflation.

Banks have responded by putting up the cost of loans. Barclays is lifting rates by up to 0.35 percentage points on a range of fixed-rate mortgages, while Halifax has announced rises of up to 0.20 percentage points on some products from next Monday.

NatWest (RBS) has increased rates on a range of its fixed deals while HSBC and TSB are expected to make similar moves.

Markets now seem convinced that the base rate will rise to 0.25% next Thursday when the Bank’s monetary policy committee concludes its latest two-day meeting.

They believe it could rise to 1% by next May, still extremely low against periods of double-digit rates, but it could hit 3.5% by 2023 according to a forecast from the Office for Budget Responsibility, which would make a material difference to monthly payments and demand for homes.

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