HSBC, NatWest and Virgin Money changing interest rates

More mortgage providers will increase their rates on new fixed deals on Friday following a series of changes since the start of the year.

January saw lenders cutting their rates sharply, bringing some relief to 1.6 million people set to remortgage this year.

But higher costs faced by providers to fund mortgage lending means many have raised rates again in recent days.

HSBC, NatWest and Virgin Money are all increasing the cost of new deals.

This will mean the end of widely available five-year fixed deals with a rate of less than 4%. The average rate on all new fixed deals has been edging higher recently as lenders have altered their pricing.

"This may catch some borrowers by surprise when the rate story this year has generally been one of falling rates," said David Hollingworth, from broker London and Country.

He said lenders had been shifting rates regularly. They are responding to the view of investors who now expect the Bank of England's Monetary Policy Committee to make fewer, and later, changes its base rate of 5.25% this year than previously anticipated. Cuts in this rate makes borrowing less expensive.

• What are UK interest rates and when will they fall?

The interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. Doing nothing would leave people on a variable rate, which is very expensive.

About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.

Santander, Coventry Building Society and TSB all raised rates on new fixed deals earlier in the week.

"HSBC's best buy deals were never going to last long once Santander pushed up its fixed rates," said Aaron Strutt, of mortgage broker Trinity Financial.

"While they have gone up, [deals] are still reasonably priced. Some lenders now offer two-year fixed-rates priced around 4.4% and five-year fixes priced around 4.2%.

"Lenders have had a busy start to the year and the property market has really picked up. These rate hikes may well start to knock the property sector again if they continue."

Andrew Montlake, managing director of Coreco mortgage brokers, said: "There is massive sense of deja vu as several mainstream lenders have increased their rates with little notice in a throwback to the dark days of 2023.

"This all makes life extremely difficult for those trying to find a new mortgage, as once again, quick decisions are needed or carefully worked out budgets need to be revisited, which can sometimes mean the difference between obtaining their dream home or not."

However, there are signs of lenders failing to settle on where rates should be set. Halifax, part of Lloyds Banking Group, is cutting the rates on some of its deals on Friday.

"I expect there will still be plenty of jockeying for position as the market remains extremely competitive but in the short term we may still see more movement in mortgage rates," Mr Hollingworth said.