May 30, 2024

Mortgage lenders hike interest rates as market jitters set in

Mortgage A terrace of houses in Brighton, UK

Mortgage lenders are hiking rates again. (Bennett Dean)

Anxiety has set in among UK mortgage lenders, with rates being hiked left, right and centre, amid uncertainty about how the Bank of England‘s interest rate path will play out.

While Barclays hiked its rates for the second time in seven days on Monday, having been the first to move on Friday, Accord, NatWest, Leeds and HSBC all announced rate increases, as bets are pared on the chances of a dovish move by bank chief Andrew Bailey and the monetary policy committee in its next meeting.

NatWest upped rates on selected two and five-year switcher deals by 0.1 percentage points, while Barclays also said it would increase the rate on some products going up by 0.2 percentage points.

“This second price increase by Barclays in less than seven days just shows how fragile our market is,” said Justin Moy, managing director at EHF Mortgages.

“With lower expectations for base rate cuts, the cost of oil and imports escalating, this is going to be a difficult few months for borrowers and home buyers to navigate. Inflation is not the only factor when setting rates as we know, but the influence of worldwide issues has rapidly influenced recent swap rates.”

Read more: Higher UK interest rates could add £29bn to energy bills by 2050

The moves come as bets ramp up on the timing for UK interest rate cuts, with forecasters at EY Item Club looking to a fall of 75bps by the end of 2024, with the first cut to come in June.

While it is uncertain whether Consumer Price Index (CPI) inflation will decline to the Bank of England’s 2% benchmark in April, due to sticky services inflation, the EY Item Club expects it to do so by the second half of 2024.

Others are less optimistic, with some economists suggesting the base rate – currently set at 5.25% – will only start to drop in November.

“Just when the market appears to be picking up some momentum, there is a sharp change of direction,” said Elliott Culley, director at Switch Mortgage Finance. “We are now seeing the spike in Swap rates last week, filtering through to the public as lenders raise their rates in response.”

Despite the wild ride for mortgage rates, property prices are still rising in the UK, led by the top end of the market, according to Rightmove data published on Monday. The average house price is now £372,324, 1.1% higher than the previous month.

Read more: UK house prices at near record highs despite interest rate hikes

Today’s rates from major lenders:

Rates for a £300,000 property, with a 30-year mortgage and a 20% deposit for a first-time buyer from Barclays are: Five-year fixed rate at 4.8%, with repayments of £1262 a month, according to figures pulled from Nerdwallet.

The same deal at Natwest will get you a rate of 4.47% with repayments at around £1211 a month.

Meanwhile, TSB offers an initial rate of 4.49% with repayments of £1,214 a month.

Halifax offers an initial rate of 4.51% with repayments of £1,217 a month.

Nationwide offers an initial rate of 4.7% with repayments of £1,276 a month.

A representative example from HSBC suggests a repayment mortgage of £178,881.91 payable over 26 years initially on a fixed rate for 2 years at 6.08% and then on a current variable rate of 6.99% (variable) for the remaining 24 years would require 24 monthly payments of £1,143.10 and 287 monthly payments of £1,240.57, plus one final payment of £1237.21.

The total amount payable would be £385,010.20 made up of the loan amount plus interest of £205,833.29 and a solicitors fee of £295.

Watch: How much money do I need to buy a house?

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