Mortgage rate hikes ‘unwelcome news’ for homeowners as lenders adjust fixed-rate offerings

Homeowners seeking new mortgage deals are facing a wave of rate increases, with a financial information website warning of “unwelcome news” for borrowers.

Moneyfacts reported that numerous lenders, including First Direct, Coventry Building Society, Yorkshire Building Society, and Nottingham Building Society, have adjusted their fixed-rate offerings upwards.

This surge in mortgage pricing momentum has prompted some smaller providers to temporarily pull products from the market.

These latest adjustments follow similar rate hikes implemented last week by major institutions such as HSBC UK, NatWest, and Nationwide Building Society.

Meanwhile some major mortgage lenders are poised to push up rates on Tuesday.

Barclays has confirmed that it will hike some rates from Tuesday.

A Barclays spokesperson said: “We regularly review our mortgage rates for customers and, due to a recent rise in swap rates, we are making a number of updates to our range.”

New rates will also be live on Tuesday across mortgage giants Halifax and Lloyds.

The average two-year fixed homeowner mortgage rate on the market on Monday morning was 4.87%, up from 4.84% on Friday, according to Moneyfacts’ records.

The average five-year fixed homeowner mortgage rate on Monday morning was 4.98%, rising from 4.96% on Friday.

Adam French, head of consumer finance at Moneyfacts, said: “Mortgage rates had looked poised to fall ahead of an expected March base rate cut, but the escalation of conflict in Iran has abruptly shifted the mood and revived inflation fears, particularly as disruption in energy markets feeds through to higher prices.

“This has prompted markets to look again at the likelihood of any near-term interest rate cuts from the Bank of England, with expectations of lower rates pushed further into the future.

“This change in sentiment has rapidly rippled through into the swap markets lenders use to fund fixed-rate mortgages.”

He said: “Because these swap rates underpin the cost of offering fixed deals, lenders often have little choice but to adjust pricing when funding costs move quickly, and it is now starting to show in mortgage costs.

“Many lenders have moved to increase rates as market conditions have deteriorated. HSBC, Nationwide Building Society, Virgin Money and Gen H have all introduced fixed-rate increases of up to 25 basis points, while several others have nudged selected deals higher.

“As a result, average mortgage pricing has risen, with the Moneyfacts average two-year fixed rate rising to 4.87% and the average five-year fix to 4.98% on Monday March 9.

“It’s unwelcome news for borrowers as it looks like we are entering a period of much more volatile mortgage pricing than had been expected just a few weeks ago and the new direction of travel will largely depend on what happens in global markets.

“If the conflict continues to fuel inflation concerns and keep swap rates elevated, upward pressure on mortgage rates may persist.”

Nicholas Mendes, mortgage technical manager at John Charcol, said: “Mortgage rates had been gradually edging down over the past few weeks as markets priced in a series of Bank of England rate cuts later this year.

“The escalation in tensions involving Iran has shifted that tone quite quickly, as financial markets tend to react rapidly when geopolitical risk feeds into inflation expectations.”

He said: “We’re likely to see another wave of lenders withdrawing or repricing deals over the coming days, including some who only increased rates last week.

“When funding costs move this quickly, lenders typically respond fairly quickly as existing hedging rolls off, and they look to protect margins.

“Looking ahead to the next week or so, much will depend on whether markets settle or if volatility continues. Swap markets had previously been pricing in several Bank of England cuts this year, but expectations have shifted quickly.

“At this stage, we are closer to a scenario where perhaps only one cut materialises across the year, rather than the series markets had anticipated a few weeks ago.

“For homeowners approaching a remortgage, the key point is that volatility can push mortgage pricing around quite quickly in either direction.

“Many lenders allow borrowers to secure a new rate several months before their current deal ends, and a broker can then keep reviewing the market and move them onto a cheaper deal if pricing improves before completion.

“Securing a rate early can therefore act as a form of insurance if markets remain unsettled.

“For buyers, the wider economic backdrop may also start to play a role. If higher inflation and borrowing costs begin to weigh on economic activity, the combined effect can start to cool property price growth.

“That can sometimes give purchasers more room to negotiate, particularly if sellers become more realistic about the market conditions ahead.”