Several major lenders, including Nationwide, NatWest and Santander, have announced increases to rates across a range of mortgage products.
The move reverses a recent trend of rate cuts and reflects wider economic uncertainty, which has pushed swap rates higher and significantly reduced expectations of a Bank of England interest rate cut later this week..
Hina Bhudia, partner, Knight Frank Finance, said: “Swap rates have risen in the past fortnight as stronger-than-expected economic data has prompted investors to reassess their outlook for UK borrowing costs. If the economy remains this resilient, the Bank of England may only cut rates once more this year.
“That’s exerting upwards pressure on mortgage rates and several of the larger lenders, including Nationwide, NatWest and Santander have announced increases in the past week. These are fairly small increases at the moment, but they threaten to sap momentum from the recovery in activity that was strong through January.”
Recent rate increases from lenders such as Nationwide and Santander are a reminder that mortgage pricing can change quickly, even when this week’s Bank of England decision is widely expected to be a hold, according to Nicholas Mendes, mortgage technical manger at John Charcol.
He commented: “Fixed mortgage rates are influenced less by the base rate decision on the day, and more by what is happening in swap rates, which lenders use as a guide to their longer-term funding costs. Swap rates have edged higher recently, so some lenders are reflecting that in their pricing. If swaps remain elevated, it would not be a surprise to see other high street lenders follow with similar repricing over the coming days.
“The key point for borrowers is that a base rate hold does not automatically mean mortgage rates fall. If funding costs rise, mortgage rates can move up, even with no change from the Bank of England.
“In the near term, it would be sensible to expect smaller, more incremental moves rather than significant reductions over the next few weeks. Competition will still exist, but pricing is likely to remain changeable as lenders respond to funding costs and demand.”
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