Average two-year fixed mortgage rates are now 2 percentage points higher than at the start of the year, adding an average of £159 to typical monthly payments.
According to an analysis by L&C Mortgages, the average two-year home loan rose to 3.46 percent, while the five-year fixed loan rose to 3.5 percent.
The same figures in January were only 1.3 percent respectively. 1.55 percent. Based on two years, this corresponds to an increase of 166 percent.
A borrower taking out a mortgage with a typical repayment rate of 150.000 borrowed over 25 years at the average two-year interest rate would now face monthly payments of £159 more than at the start of the year. This is an annual increase of more than 1.£900 compared with January.
Interest rate increases: Mortgage rates are up, meaning potential pain for homeowners
The Bank of England is expected to raise interest rates from 1.25 percent to 1.75 percent later today, and will do nothing to calm borrowers' fears.
The prime rate has risen to 1.25 percent from 0.1 percent in November. Lenders typically pass these increases on to their customers.
If it rises as expected, it will reach its highest level since 2008, when the central bank slashed interest rates amid the global financial crash.
The increase in the key interest rate is an attempt by the bank to fight inflation, which is now expected to reach 15 percent by the end of the year.
In addition to new borrowers, rising interest rates will hit homeowners looking to restructure their debt.
Two years ago, in early August 2020, borrowers could have taken out a two-year rate with Coventry Building Society at 1.3 per cent with an LTV of 75 per cent plus a small fee of £999.
With a mortgage of 225.000 £ to 300.000 over 25 years on this deal they would have had monthly payments of £878.87.
If they rescheduled now to the current top ten two-year average of 3.46 percent, the monthly payments would be reduced to a balance of 209.566 £ over the remaining 23 years 1.102.11 per month, £223 more than their original deal.
David Hollingworth, associate director at L&C Mortgages, said, "The mortgage landscape continues to change rapidly as lenders balance volatile funding terms and servicing levels, forcing frequent changes to mortgage products.
"As a result, mortgage borrowers face rising payments, whether as a result of prime rate increases or when the protection of their current fixed contract ends.
"As borrowers prepare for another prime rate hike this week, many are unsurprisingly seeking the protection of a fixed rate.
"This offers monthly savings as well as building payment security for households already feeling the strain of other cost-of-living increases."
Acknowledging the risk, Hollingworth notes that many borrowers look for a new deal as early as possible to secure lower interest rates.
And lenders react. Homeowners can now check how much they would have to pay for repairs with This is Money's mortgage rate comparison calculator, created with partner L&C.
Raymond Boulger, senior mortgage technical manager at John Charcol, says lenders are extending the maximum term for product transfers to retain existing customers.
"This means that borrowers looking to remortgage may find their provider allows them to sign a new contract earlier than their contract limit – traditionally three to four months before the end of the plan – allowing them to secure a lower interest rate ahead of the expected future rises to.
"It is relevant that currently several lenders have lower product transfer rates than the rates they offer for new business.
"It costs less to keep a customer than to get a new one, and especially right now, with many lenders' service levels suboptimal, there is a strong incentive to keep existing customers rather than having to replace them with new ones, which is much more time-consuming," he says.
Rates on fixed-rate 2-year mortgages have risen 2% since January, putting additional pressure on borrowers
Others warn that lenders are also updating the interest rates they offer at an alarming rate.
Ashley Thomas, director at mortgage broker Magni Finance, said, "Now lenders are raising rates and withdrawing existing products much faster.
"Where they used to give us at least a day's notice, this has now been reduced to a few hours in some cases.
"For example, one lender emailed at 4:30 p.m. yesterday that it would change its existing rates by the end of the day.
"That makes it very difficult to secure a mortgage, so I would advise people to move as soon as possible."
The Bank of England is expected to raise interest rates again this month
Other brokers, including Boulger, report a significant slowdown in the time it takes banks to process applications as they are overwhelmed by requests from borrowers trying to get ahead of future rate hikes.
That has been the case for several weeks, he says.
Rhys Schofield, managing director of mortgage company Peak Money, says: "A cautionary tale would be the normally very good and reasonably priced Nationwide, which currently takes nine working days just to check a payslip or valuation report.
"This is quite widespread at the moment because lenders are simply struggling to keep up and the only way to close the taps is to change interest rates."
Nationwide said, "Our current average time frames are in line with our expectations given the high demand we are seeing in the marketplace.
"We update the deadlines on our website daily so that everyone has an up-to-date view of how long their application could last."
Boulger adds that Gilts – fixed rate government bonds that are particularly sensitive to interest rate changes – have had a volatile few months with swings in both directions.
The 10-year gilt yield peaked at 2.62 percent 6 weeks ago and is 0.7 percentage points lower at 1.92 percent at the time of writing.
"The fact that many lenders are struggling with servicing means they have little incentive to cut rates to reflect the fall in funding costs, as the increase in business a lender would gain by becoming more competitive would only exacerbate its servicing problems," he said.
The best mortgage rates and how to find them
Mortgage rates have risen significantly as the Bank of England prime rate has risen rapidly.
If you're looking to buy your first home, move or remortgage, it's important to get independent advice from a broker who can help you find the best deal.
To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.
You can use our L&C-powered mortgage calculator to filter quotes to see which ones match your home's value and deposit amount.
You can also compare different fixed-rate mortgage terms, from two-year terms to five-year terms to ten-year terms, showing monthly and total costs.
Use the tool at the following link to compare the best offers, taking into account both fees and rates. You can also start an application online at your leisure and save in between.