Recent mortgage rate hikes are placing a heavier burden on homeowners with substantial equity, as numerous lenders react to unexpectedly high inflation statistics.

In the past week, nine financial institutions, including leading banks and building societies, upped the rates on their fixed mortgage products. The largest increases affected loans with lower loan-to-value (LTV) ratios, which primarily impacts borrowers with higher deposits or those remortgaging who have reduced their outstanding balance.

Notable high street banks like Halifax, Nationwide Building Society, NatWest, and Santander have initiated these rate adjustments while generally keeping rates stable for customers with smaller deposits.

Earlier this year, mortgage rates were trimmed as lenders vied for market share; however, this trend shifted after inflation surged in April, with the consumer price index jumping to 3.5% from 2.6% in March.

This inflation rise has diminished expectations for an imminent interest rate cut by the Bank of England, creating challenges for 1.13 million homeowners facing the expiration of their mortgage deals this year.

The most significant interest rate hikes are likely to affect those seeking to remortgage. For example, Nationwide raised its two-year fixed rate for borrowers remortgaging with at least a 40% deposit (plus a £1,499 fee) from 3.84% to 4.04%. In contrast, the rate for new purchases with the same deposit and fee rose more modestly from 3.84% to 3.99%.

Additionally, the five-year fixed rate for homeowners with a 40% deposit saw an increase from 3.84% to 4.09%, potentially adding £336 annually to the repayment of a £200,000 mortgage over 25 years.

NatWest similarly increased its rates for two-year fixed remortgage deals from 3.88% to 3.94%, and its five-year fixed rate rose from 3.88% to 4%.

Mark Harris, a representative from mortgage broker SPF Private Clients, noted, “Historically, the lower LTV sector has been the most competitive, leading to lower rates. However, any rise in lender costs could render those deals less profitable, justifying the increased rates for borrowers with significant equity.””

Lenders set their fixed mortgage rates based on projections for the Bank of England’s future base rate, which was recently lowered from 4.5% to 4.25%.

Just a month ago, analysts from major investment banks like Barclays and Morgan Stanley anticipated multiple base rate cuts this year due to global economic concerns stemming from Donald Trump’s trade measures.

However, the recent uptick in inflation and stronger-than-expected economic growth during the early part of 2025 has shaken investor confidence. Jack Meaning, chief economist at Barclays UK, now predicts only two further cuts this year.

Given the fluid nature of mortgage market forecasts, both those remortgaging soon and potential homebuyers are advised to secure favorable interest rates promptly, as this can be adjusted later if necessary.

The most competitive two-year fixed rate for new buyers currently stands at 3.86% with HSBC, while the rate for remortgagers matches at 3.84%, each carrying a fee of £999.

Peter Stimson from the mortgage lender MPowered indicated that many institutions that had aggressively reduced rates to attract business are now reassessing their pricing strategies.

“With expectations for the next base rate cut likely not occurring until late summer at the earliest, some of the exceptionally low rates introduced at the beginning of May may soon vanish. In the coming weeks, we expect to see mortgage interest rates increase by approximately 0.2 percentage points,” Stimson remarked.

Typically, borrowers can secure a new deal up to six months before their current arrangement ends, while mortgage offers for purchases generally remain valid for six months. Lenders may occasionally allow brief extensions if extra time is required to finalize transactions.

Harris added, “For anyone looking to buy or refinance soon, locking in a competitive rate now is prudent. If rates continue to rise before your transaction is finalized, you’ll be glad to have secured a good deal; conversely, if rates decline, you can seek a new, lower offer as the date approaches.”