Today marks a scheduled rise in mortgage rates from many lenders. Many homeowners could find themselves paying between £200 and £700 extra per year as lenders increase their prices due to the weak economy.
It is believed that the majority of borrowers affected will be Halifax customers as the lender has recently announced their plans to increase their borrowing rate by 0.49%. Predictions suggest that this could result in around 850,000 of Britain's biggest mortgage lender's customers repaying around £55 extra per month.
Bank of Ireland customers are likely to be hit the hardest with rises of around 1.5%. With Co-operative, Clydesdale/Yorkshire and One Account also confirming escalations of between 0.25 and 0.5 percent. Other lenders are also set to increase their rates in the coming months.
Lenders have stated that the rates hike is a culmination of the dismal economic climate and the increased cost of supplying a mortgage. Therefore although the Bank of England's standard rate of interest of 0.5% has not risen in over 3 years, nearly a million borrowers with Standard Variable Rates (SVR) could be affected by the increases.
Around six million people in the UK are currently in receipt of SVR mortgages - the rates which borrowers receive once their fixed rate deal has expired. The increases mean that the rates on many SVR mortgages will go up to between 4 and 5%.
In addition to SVR mortgage rates, RBS-Natwest will be escalating the rate of their One Account, a non-SVR mortgage by 0.25%. Many new borrowers will also be affected as a number of fixed-rate mortgages increase by around 0.4 percent. The increases do not stop there - arrangement fees are currently at a record high of £1,439 average.
As lenders tighten their borrowing criteria and an increasing amount of borrowers find themselves in negative equity, it is believed that many homeowners may find it difficult to switch to better deals. This could result in a growing number of 'mortgage prisoners' in the UK.
Ray Boulger, the senior technical manager from mortgage broker, John Charcol suggested that the degree of equity that borrowers have left on their mortgages will be 'the most important factor' for those keen to switch deals, suggesting that this could offer them access to better deals and lower rates.
The Credit Mortgage Lenders association predict that with anticipated rises, the number of repossessions could rise by around 22 percent this year.
According to the Financial Services Authority, around 50% of borrowers who have taken out mortgages since 2005 will be affected by these increases.