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UK lenders continue to raise rates and pull deals

Mortgage market misery has increased for homebuyers as lenders continue to increase borrowing rates and pull deals, prompting record numbers to take out loans of more than 35 years to make monthly payments more affordable.

A record 19% of all loans taken out by first-time buyers in March were for terms of 35 years or longer, with more than half taking a loan of more than 30 years, as house hunters seek to make the soaring cost of loans more affordable.

This is the highest proportion since records began in 2005, the trade body UK Finance is expected to say this week, and more than double the 9% rate in December 2021, when the Bank of England started raising interest rates from a low of 0.1%.

The data is also expected to show that 8% of home movers are taking out mortgages for terms of 35 years or more, compared with 4% in December 2021.

While the move to spread out the loan period makes it more affordable every month for homeowners trying to cope with the cost of living crisis, they will pay significantly more interest over the lifetime of the mortgage. They could be laden with debt into their retirement.

The figures, which form part of a report due to be published by UK Finance this week, come as lenders continue to raise rates and pull deals in the volatile and turbulent mortgage market.

More than 100,000 households are due to come to the end of their fixed-rate deals this month, according to the Financial Conduct Authority. Homeowners are facing the stark choice of choosing deals with hefty rates or facing soaring costs by being moved on to their existing lender’s standard variable rate.

Santander, the UK’s third-largest lender, made changes over the weekend, while TSB withdrew all of its 10-year fixed-rate deals on Friday with only a few hours’ notice. On Tuesday, Coventry Building Society will increase its two-, three- and five-year deals.

Other lenders, including Barclays, HSBC, NatWest, Virgin Money, Nationwide, Skipton, and Yorkshire building society, have all increased fixed-rate deals by up to 0.85 percentage points over the last week.

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