Mortgage rates to 'stay higher for longer' as Bank of England to make major announcement

New analysis is exposing the financial strain rising mortgage rates are having on first-time buyers

Mortgage rates are expected to "stay higher for longer" in a blow to first-time property buyers and those looking to remortgage, experts warn.

Analysts from Moneyfactscompare are sounding the alarm over Britain's property crisis ahead of a major announcement from the Bank of England today.

The central bank's Monetary Policy Committee (MPC) will confirm any changes to the UK's base rate, which determines the cost of borrowing and impacts mortgage deals.

According to analysis from Moneyfacts, the average five-year fixed rate for borrowers putting down just five per cent has now broken through the six per cent barrier, reaching 6.07 per cent at 95 per cent loan-to-value (LTV).

The Moneyfacts Average New Mortgage Rate currently sits at 5.59 per cent, having risen from 5.47 per cent at the beginning of July.

That figure looks even starker when compared with the 4.90 per cent recorded at the start of March, representing a jump of nearly 0.7 percentage points in under five months.

Any future increases to the Bank of England Base Rate would tighten conditions further still, the analysis warned.

Santander and HSBC both raised fixed and tracker rate products this week, following a similar move by Lloyds Bank the week before.

The increases have been driven by turbulence in swap rates, the wholesale markets that underpin mortgage pricing, which have been unsettled by prolonged geopolitical tensions across the Middle East.

Lenders have responded by passing those elevated costs directly on to borrowers. Crucially, mortgage pricing can shift independently of any decision by the Bank of England on its base rate.

The average standard variable rate, meanwhile, stands at 7.13 per cent, underscoring the premium paid by borrowers who have not locked into a fixed deal. That figure peaked at 8.19 per cent in late 2023.

A first-time buyer borrowing £250,000 over 25 years with a five per cent deposit faces annual repayments roughly £600 higher than someone who has managed to save 10 per cent.

This calculation from Moneyfacts is based on the difference between average five-year fixed deals at 95 per cent and 90 per cent LTV, 6.07 per cent versus 5.75 per cent.

A quarter-point increase would add approximately £450 per year to mortgage costs, while a half-point rise would push annual repayments up by around £900.

Those figures are calculated using the overall average five-year fixed rate of 5.66 per cent across all LTV tiers, applied to a typical £250,000 loan repaid over a quarter of a century.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: "Interest rates are expected to stay higher for longer and those who delay locking into a fixed rate mortgage could pay the price.

"The cost of living is expected to worsen in the coming months which puts pressure on the MPC at the Bank of England to consider a rate increase."

She noted that despite the recent upward drift in fixed rates caused by swap rate volatility, switching away from an expensive revert rate remains worthwhile.