A mortgage rate rise could threaten the housing market recovery.

After mortgage rate rise announcements by the RBS and Halifax, it is feared that if many more lenders follow suit and raise their rates, then this could potentially cut short the early housing market recovery which is indicated by higher lending volumes.

Two of the largest lenders in the UK increased their mortgage rates within the space of one week advising that higher funding costs were to blame.

At Deal Direct our concern is for first-time buyers. If more lenders bring in a mortgage rate rise, then those with a smaller deposit may be the hardest hit because in general their funding costs more. Any mortgage rate hike could pave the way for banks to impose higher rates on first-time mortgage products.

With the Halifax rate increase, customers who reverted to the lender’s standard variable rate at the end of their initial fixed or tracker deal will be affected by the change. Those affected should not panic though as while the rate is going up, it will still be below 3.99 per cent and mortgage holders will be given time to switch deals.

It is usual for banks to wait for an increase to the BOE base rate before increasing mortgage rates, however because interest rates are predicted to remain at 0.50 per cent for the foreseeable future lenders hands have been forced .

We advise those on SVRs which are to increase to shop around, by comparing remortgage deals on offer it should be possible to avoid a mortgage rate rise. It is recommended that you contact Deal Direct and allow us to source the most competitive up to date remortgage offers on the market.

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