First-time buyers were hit hardest by the higher rates, as the biggest increases were for NatWest’s “shared shares” and Help to Buy loans. The cost of a £ 200,000 shared equity loan will rise from £ 916 a month to £ 992 – costing borrowers almost £ 1,000 a year.
Mortgage rates have risen since rising inflation caused the Bank of England to raise rates. However, the increases often surpassed the 0.25 percentage point increase to the Banking rate announced last month. NatWest follows other high-street lenders HSBC, Lloyds and Nationwide, all of which raised interest rates on fixed-rate home loans in June.
The Bank of England reported that the interest rate paid on new mortgages rose by 0.13 percentage points to 1.95pc in May. With rates rising, borrowers are rushing to refinance debt to avoid further increases. The Bank of England also reported that mortgage debt increased to £ 7.4bn in May 2022 from £ 4.2bn in April, exceeding the pre-pandemic average of £ 4.3bn.
Many lenders are also pursuing long-term loans in search of financial security. According to analyst Moneyfacts, nearly two-thirds of mortgage lenders opted for a five-year fixed-rate loan in May.
The rush to include low interest rates has left borrowers struggling to process new mortgage applications ahead of the next Bank Rate decision on August 4, when interest rates are expected to rise again.
Mark Dyason of Edinburgh Mortgage Advice, a broker, said some lenders are trying to dampen demand. He said the market “can not handle the increase in demand.
“Reversal times are getting longer and there are a number of lenders who currently say it takes more than two weeks to look at documents related to applications,” he said. “We have seen at least three buy-to-let lenders withdraw entire series in the past week to avoid application peaks.”
A NatWest spokesman said: “We are constantly monitoring our rates, in line with market conditions.”