Property market recovery 'put on pause' by mortgage rate hikes warns Knight Frank

However, customers on variable or tracker deals will see their rates fall in line with the Bank of England cut in its benchmark rate from 5% to 4.75% last week.

The majority of borrowers are on two and five year fixed deals.

Spanish owned Santander is following a number of other leading lenders in recent days, including TSB, Virgin Money and Nationwide, in pushing through hikes on fixed rates.

Hina Bhudia, partner, Knight Frank Finance, said: “It often takes one large lender to prompt a broader shift in mortgage pricing and announcements of rate hikes are now coming thick and fast. The outlook for interest rates has changed and the market needs to reprice as a result.

“The moves we’re seeing aren’t small either - often about 0.3%, which will be enough to suppress housing market activity as we move towards the end of the year. We’ll need a real and enduring change in the inflation outlook for mortgage rates to begin falling again, which means the recovery is on pause for now.”

The move follows a rise in the City swap rates that are used to price residential deals. City markets no longer expect the Bank of England to cut rates so aggressively as before the Budget, which unleashed an extra £70 billion of extra public spending.

Donald Trump’s return to the White House next month is also expected to deliver an expansionary boost to the world economy that could unleash another bout of inflation,

According to analysts Moneyfacts the average 2-year fixed residential mortgage rate stood at 5.43% today, up from 5.42% yesterday. The average 5-year fixed residential mortgage rate today is 5.16%, up from 5.14%.

John Fraser-Tucker, head of mortgages at broker Mojo Mortgages said, “While the Bank of England’s decision to lower the bank rate last week might lead some to expect across-the-board reductions in mortgage rates, it’s important to understand that the mortgage market doesn’t always move in perfect sync with the Bank of England’s base rate decision.

“Fixed-rate mortgages, in particular, are influenced by a complex array of factors beyond just the Bank Rate. These can include the lender’s own funding costs, their view on future economic conditions, competitive positioning in the market, and even their internal goals for new business.

“In Santander’s case, their decision to increase some fixed rates, despite the recent Bank Rate reduction, could be driven by any number of these factors

“Lenders continually assess risk and adjust their offerings accordingly. Sometimes, this means we see rate increases even in an environment where we might expect decreases.”