UK Mortgage Rates On The Rise

Rising mortgage rates could see much higher payments for hard-hit customers

November 1, 2021
UK Mortgage Rates On The Rise
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Many of the UK’s largest mortgage providers have started to raise their mortgage rates, with the Bank of England expected to raise interest rates in the imminent future.

HSBC, NatWest, Barclays and TSB all announced new higher rates this week just hours after the new Budget from Chancellor Rishi Sunak, with Halifax, Nationwide and Santander all doing similar in the last couple of weeks.

Mortgage rates have been at record low levels for a while now, impacted by the economy suffering during the COVID-19 pandemic. However, it looks like the time of super-low rates might be over, which could see homeowners paying an average of around £600 more a year.

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Households Feeling The Pinch

The current Bank of England interest rate is 0.1%, the lowest it has ever been. The rebounding economy has seen the market predicting that the rate may rise as early as next month, and it’s expected that it could rise to 1.25% by the end of 2022, the highest it would have been since February 2009 when it dropped from 1.5% to 1%.

Rishi Sunak warned in this week’s budget that inflation would rise above 4%, and forecasts suggest that mortgage interest payments would rise by around 13% a year by 2023. The result is households are looking at potentially years of stagnating living standards, with higher taxes also contributing.

It also comes as homeowners are seeing huge rises in energy bills as a result of the energy crisis. It’s predicted that the next few years will see the real impact of COVID-19 on households as the country begins to rebuild the economy.

Banks Seeing Financial Upturn

While things aren’t looking too rosy for consumers, banks are starting to reap the benefits of a recovering economy. Lloyds Banking Group announced their latest quarterly results this week, with profits doubling to £2 billion.

A large reason for this success was the mortgage market, with a £2.7 billion net increase in home loans for the banking group in the three months up to September. The profit surge far outweighed analyst predictions which were averaging out at an expected £1.3 billion total profit for the group.

The bank has also said that it can release £84 million in funds that had been earmarked for loan defaults during the pandemic, now that the economical situation in the country is improving, boosting its figures further.

It continues a trend of improving results for banks, with TSB – once a part of the Lloyds group – announcing a return to profit in the quarter, again founded on mortgage lending. Other banks including HSBC and Barclays have also recently reported a rise in profits.

Banks have made a number of cost-cutting measures this year to help improve their financial situation too, with hundreds of branches closing and many shutting down or merging offices, in part due to a shift to remote working culture. As consumers start to find finances being hit by rising mortgage costs and energy bills, it will be interesting to see how banks respond.

Ian Lewis
Ian Lewis
Ian is an experienced writer with 15 years’ experience working in journalism and marketing. He’s worked in-house in financial institutions as well as writing freelance pieces for a variety of banking and financial trading websites.

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Mentioned Banks

About Barclays Bank Barclays is a British multinational investment bank and financial services company. It was founded in 1690 and is headquartered in London. Barclays originated...
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About HSBC Bank HSBC is a British banking and financial services company. It is the largest bank in Europe and the seventh largest bank in the world. The bank originated in Hong Kong...
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About Lloyds Bank Lloyds Bank is a British retail and commercial bank. One of the ‘Big Four’ clearing banks, it was founded in Birmingham in 1765. It is the largest retail bank in...
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NatWest, or National Westminster, is a retail and commercial bank based in the United Kingdom. It is one of the ‘Big Four’ UK clearing banks and has more than 7.5million personal banking...
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About Santander Santander UK is a British bank. Though it is a British company and autonomously managed, it is entirely owned by the Spanish Santander Group. Santander is one of the...
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About TSB TSB is a UK-based retail and commercial bank. It is a subsidiary of the Sabadell Group. The TSB we know today came to be in 2013, formed from Lloyds TSB Scotland PLC and...
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About Halifax Formerly known as Halifax Building Society, Halifax is a British bank. It is named after the town in West Yorkshire where it was founded in 1853 as a building society....
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About Nationwide Nationwide is a British building society and mutual financial institution. Headquartered in Swindon, it has additional offices in Glasgow, Bournemouth, Northampton...
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