A number of banks have increased their mortgage rates despite the Bank of England’s recent interest rate cut. Here’s everything you need to know
Homeowners are facing higher interest rates despite a Bank of England’s (BoE) cut. Numerous lenders have decided to hike their mortgage rates, referencing an anticipated inflation surge post-government budget.
Several mortgage deals have also been pulled off the market This comes even though the BoE confirmed a dip in interest rates to 4.75 per cent against a backdrop of a 1.7 per cent inflation rate, still shy of the targeted 2 per cent.
Swap rates, which greatly affect fixed-term mortgages, are also playing a significant role in this uptick—a repercussion of predicted hikes in future interest rates. At present, the average two-year fixed mortgage stands at 5.44 per cent, slightly up from the pre-announcement rate of 5.39 per cent.
Financial expert Hina Bhudia of Knight Frank Finance remarked: “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.” She adds, “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. 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.”
Nicholas Mendes, mortgage technical manager at leading brokerage John Charcol, commented on the recent lenders’ strategy, saying: “While many lenders have opted to maintain their existing rates to preserve business volumes and service standards, those offering competitive pricing have been forced to adjust, likely due to applications levels. These influxes often stretch service levels, prompting rapid rate changes to manage demand effectively.”
He further explained the market’s volatility, pointing out: “Adding to the pressure, swap rates – key indicators used by lenders to price fixed-rate mortgages – have edged upward, further necessitating these adjustments. The combination of market dynamics and rising swap rates highlights the difficult landscape borrowers are navigating.”
All the banks that have hiked their mortgage rates
In a candid statement, a Nationwide spokesperson said: “Nationwide is not immune to the current swap rate environment and the changes we’re making on our fixed-rate range are reflective of that and the rate changes happening across the market. Our tracker rates are seeing a reduction to reflect last week’s bank rate decision.”
“We continue to support existing customers with our pricing pledge and remain competitive and well-positioned in the market to support all borrowers.”
