Two million to be hit by fixed-rate rises

Mortgage lenders have dramatically increased the cost of fixed-rate deals despite interest rates being kept on hold, research has found.

Since the start of June nine mortgage providers have either shelved selected fixed deals or scrapped their entire range.

A further 30 banks and building societies have increased their rates by up to 0.7 per cent, according to data analyst Moneyfacts.co.uk.

Of those upping rates on their best deals, NatWest is the biggest offender, putting rates on fixed mortgages up by as much as 0.7 per cent.

It had a 6.09 per cent two-year fix last month, replaced with one at 6.79 per cent. The difference is £56 a month on a £130,000 mortgage or £1,344 over the two-year period.

First Active, part of the Royal Bank of Scotland, increased its two-year fixed-rate deal by 0.49 per cent from 5.65 per cent to 6.14 per cent this week.

Birmingham Midshires, part of Halifax, increased rates by 0.35 per cent to 6.74 per cent on its combined mortgage and personal loan.

The rises come despite the Bank of England base rate remaining at 5.5 per cent and experts are warning that some households could find their finances becoming stretched.

Some 820,000 borrowers will come off cheap two-year fixed rates as low as 4.29 per cent between August and December and two million in the next 18 months, according to the Council of Mortgage Lenders.

Personal finance website Fool.co.uk estimates that the average family has a £50-amonth shortfall in its budget. That deficit is even worse for the 15million households on less than the average income of £32,800.

Lisa Taylor, from Moneyfacts, said: "Anyone coming to the end of a fixed-rate deal will be in for a nasty shock when they see the increase in their monthly repayments."