Mortgage borrowers could face a fresh round of rate increases over the coming days as lenders respond to rising swap rates, according to Moneyfacts.
HSBC and NatWest are among the biggest banks to increase mortgage rates since the start of September, with further repricing expected across the market as lenders come under pressure to protect margins.
The latest movements follow renewed volatility in wholesale funding markets, with swap rates now considerably higher than a month ago.
Moneyfacts calculates that a 0.25 percentage point increase on a typical two-year fixed mortgage would add around £38 to monthly repayments on a £250,000 loan over 25 years. That is equivalent to an additional £456 a year, based on a rate increasing from 5.63% to 5.88%.
MORE RISES EXPECTED
Rachel Springall, Finance Expert at Moneyfacts, says: “The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates.
“Major lenders, which include HSBC and NatWest, have increased rates since the start of September. The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages, with more moves expected in the coming days.”
Despite the pressure, the response from lenders has so far been markedly less dramatic than during the sharp rise in swap rates in March.
Only a small number of lenders have withdrawn fixed-rate mortgages since the beginning of September, including Family Building Society, with Moneyfacts suggesting these withdrawals are likely to be temporary.
BORROWERS URGED NOT TO WAIT
Springall says borrowers hoping mortgage rates will fall in the coming weeks may now be disappointed, with the continuing US-Iran conflict adding to inflation concerns and putting further pressure on financial markets.
She adds: “Regardless of any changes to BBR, it is still essential borrowers do not delay seeking advice to navigate the mortgage maze.
“Those looking to remortgage could do so around six months in advance by securing a product transfer with their existing lender, for peace of mind. Securing a fixed rate deal compared to falling onto a revert rate is still wise, as around £230 could be saved each month in repayments.”
‘UPHILL STRUGGLE’
Nathan Emerson (main picture, inset), CEO of Propertymark, says: “Across the summer months, many potential homebuyers have faced an uphill struggle in terms of affordability.
“We have experienced an economy under pressure from global unease, which has, in part, contributed to base rates remaining higher than ideal for many people.
“Over the coming weeks, we will see further details of how the Bank of England feels the direction of travel should develop regarding the base rate.
“We will also see what key details will be announced regarding housing within the Autumn Budget. Both factors will determine future sentiment within the housing market over the coming months.”
