Borrowers with big deposits will be the worst hit as mortgage rates climb, data analysts predict 

Homeowners have benefited from the cheapest mortgages on record as rates tumbled during the pandemic.

But the era of ultra-low deals could be closer to coming to an end – particularly for borrowers with larger deposits.

The cost of a typical two-year deal for homeowners with a 35 per cent deposit is now at an eight-year high, according to data analysts Moneyfacts.

Average mortgage rates have also risen for the first time in four months.

The mortgage price war came to a halt last month amid speculation the Bank of England was preparing to raise interest rates to keep a lid on spiralling prices.

In the event, the base rate was held at 0.1 per cent. But banks and building societies have been pulling their cheapest offers at an astonishing pace – and this in turn has pushed up the overall cost of two and five-year deals.

A typical two-year fixed rate for borrowers with at least 35 per cent equity in their home is now 2.5 per cent – up from 2.11 per cent just last month and 1.99 per cent two years ago.

This is the highest average two-year rate for borrowers in this lending bracket since 2013, says Moneyfacts.

The average five-year deal in the bracket has also jumped to 2.7 per cent, from 2.32 per cent in October and 2.18 in November 2019.

Mortgage rates for borrowers with larger deposits had plummeted to record lows over the summer as banks fought for their business.

But this left lenders little wriggle room to absorb rising costs – so these rates are now rising faster.

Those with smaller deposits already pay higher rates because they are viewed as riskier – so it will take longer for rate rises to filter through.

First-time buyers with deposits of just 5 per cent have actually seen their costs fall since last month.

For them, the average two-year deal is now the cheapest it has been since February last year.

It fell from 3.32 per cent in October to 3.22 per cent in November. The average rate on a five-year deal was also down from 3.63 per cent to 3.51 per cent.

The number of mortgage deals available has exceeded 5,000 for the first time since the first lockdown after lenders reintroduced loans for riskier borrowers.

Overall, the average two and five-year deal has risen by 0.04 percentage points over the past month to an average of 2.29 per cent and 2.59 per cent respectively.

And while rates are still cheaper than last November, experts warn they could still soar if the Bank of England hikes the base rate in future as expected.

Eleanor Williams, of Moneyfacts, said: ‘Borrowers may consider this an opportune time to explore securing a new deal, as there is no guarantee that rates will not continue to increase in the months to come.’