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Some of Britain’s biggest lenders have announced a flurry of mortgage rate rises in the wake of war in the Middle East, as concerns rise over the impact on energy prices and inflation.
NatWest, the Co-operative Bank and Skipton on Friday became the latest lenders to raise the cost of their fixed-rate mortgages, following increases this week by HSBC, Nationwide, Santander and Coventry Building Society among others.
NatWest said it would raise rates from Saturday across a range of its products. A customer remortgaging at a loan-to-value ratio of 60 per cent on a two-year fix, for instance, will see rates go up from 4.01 to 4.13 per cent, with no arrangement fee.
HSBC on Friday revealed rates on some of its fixed-rate deals would rise by 0.25 percentage points, while Skipton would increase rates on its two-year fixed deals by 0.16 percentage points.
Swap rates, which influence lenders’ pricing of fixed-rate mortgage deals, have jumped this week, with two-year rates rising to 3.65 per cent on Friday morning, up from 3.33 per cent a week ago, according to finance site Moneyfacts.
“This week the mood in the mortgage market has completely changed,” said Adrian Anderson, managing director of broker Anderson Harris. “For quite some time, people have been rather nonchalant. They thought if they waited a little longer they’d probably get a cheaper deal as base rates were expected to fall.”
Instead, clients have been calling the broker this week to press ahead with remortgaging deals. Several had changed their minds about the kind of mortgage they would take, switching from tracker loans to fixed-rate deals.
“Another client who had been undecided whether to fix for two or five years called up and decided on five. He said he wanted to lock it away for longer given all the uncertainty,” Anderson said.
Aaron Strutt, product director at broker Trinity Financial, said he expected more lenders to raise their rates next week. “It seems almost certain we are going to see a lot more rate changes over the coming days,” he said.
Many lenders permit borrowers to lock in new rates between three to six months before their current fixed-rate deals expire. So brokers urged borrowers to move fast. “Delaying a decision to select a new deal could be costly, especially if you have a larger mortgage loan,” Strutt said.
Halifax released its latest house price index on Friday morning, showing that prices rose by 0.3 per cent in February compared with the previous month, continuing a recent trend towards gradually rising prices.
However, there were warnings this may not continue.
Ashley Webb, UK economist at consultancy Capital Economics, said: “We think housing will pick up further this year. But if the conflict in the Middle East isn’t resolved swiftly, fewer interest rate cuts and/or softer buyer sentiment could temper that strengthening.”
Some estate agents said the effects were already visible. Jeremy Leaf, an agent in north London, said: “There is no question some buyers and sellers have been pressing the pause button since war in the Middle East began. We expect that button will be pushed a little harder if it seems likely uncertainties over interest rates and inflation persist for much more than a few weeks.”
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