Several major mortgage lenders are increasing rates this week, which comes as bad news for homeowners – and for the Chancellor Rachel Reeves.
HSBC, one of the biggest lenders in the UK, made cuts to its range as recently as Monday, but will now up the prices on several of its products from Friday.
It is increasing rates on five and two-year fixed mortgages for homebuyers and existing customers, though the exact changes will not be unveiled until Friday morning (17 January).
It comes in a week where several sets of major economic figures were announced, including lower-than-expected inflation and slower growth to the economy than hoped.
Mortgage rates are also expected to stay higher, despite a prediction that the base rate will fall to 4.5 per cent in February when the Bank of England’s Monetary Policy Committee (MPC) meets.
Nick Mendes of brokers John Charcol said: “At present, the prospect of sub-4 per cent rates returning seems remote unless there is a significant shift in monetary policy or market conditions. Borrowers should be prepared for rates to stay above this level.”
Several lenders increasing rates this week include TSB is increasing rates on its two and five-year products by up to 0.15 percentage points.
Bereaved families face costly inheritance tax penalties due to probate delays
Read MoreVirgin Money upped rates by 0.2 percentage points on Wednesday whilst Co-op is increasing fixed rates by 0.59 percentage points on Thursday.
This will be a blow for the Chancellor Rachel Reeves and the Labour Government who promised to ease bill pressures for households across the country.
One of Keir Starmer’s key targets for the Government was to improve living standards – something that would be measured by real household disposable income.
The Chancellor is also under pressure over the high cost of servicing government debt, which is threatening to wipe out her fiscal headroom.
Economists warn she may have to make deeper cuts or raise taxes in March to meet her fiscal guidelines if costs do not come down – piling more cost of living pressures on voters.
Flatlining growth is also a headache for Reeves who is struggling to boost the economy, so anything that takes spendable income out of consumers hands will be unwelcome.
Despite some mortgage lenders increasing rates, these same lenders may also be cutting them at the same time.
Santander, for example, is upping rates by up to 0.34 percentage points but reducing some by 0.29 percentage points.
Accord, a smaller lender, is increasing its buy-to-let rates by up to 0.2 percentage points, though it is also cutting rates on its 80 per cent loan-to-value two-year product rate reducing by 0.21 percentage points.
Simon Gammon, managing partner at Knight Frank Finance, said: “Two large lenders said they would increase the cost of some mortgage products – the first of the major lenders to do so since the latest round of bond market volatility.
“That will probably prompt others to follow, which will be disappointing for anybody seeking to purchase or remortgage a home in the months ahead. That said, fairly positive inflation data from both the UK in and the US this week has calmed bond markets, which suggests we’ll see a swift repricing, rather than weeks of sustained increases in mortgage rates.”
Elliott Culley, of Switch Mortgage Finance, added: “The inflation data was a surprise and I think that has helped stem the rate rises, so they haven’t gone as high. I don’t expect rates to start falling currently. I think there needs to be more positive data before we see that.
“Something like a base rate reduction could fuel reductions but until the data with the effects of the Budget start to come through, I think it will be relatively volatile.”
Mortgage rates rose because of a previous increase in swap rates.
Swap rates follow predictions for where the Bank of England base rate will go in the future, and mortgage lenders base their pricing on these.
Although they are starting to come down, there is much ongoing economic turmoil that could easily mea.n they start to increase again.
Alper Kara, Professor of Banking and Finance at Brunel University, London, said: “Recent UK economic developments, including a slight decline in inflation and lower-than-expected GDP growth, have introduced mixed signals and heightened uncertainty in financial markets.
“Some mortgage lenders have already raised fixed mortgage rates, citing rising funding expenses due to increase in swap rates. Others, are resisting to increase mortgages rates to remain competitive, at the expense of reduced profits.
“Overall, in my opinion, the mortgage market will remain uncertain, and I would not expect further decreases in mortgage rates until this uncertainty eases. However, if the Bank of England cuts rates in February, that could lead to a reduction in mortgage rates.”
Experts have said there is unlikely to be an immediate turn in fortunes for mortgage customers despite Wednesday’s inflation figures coming in as lower than expected.
Inflation came in at 2.5 per cent in the year to December and experts say this makes the Bank of England more likely to cut rates in February, but warned not to expect mortgage cost falls.
Last week, experts also warned that rate hikes were likely to come later this month.
Stuart Cheetham, CEO of MPowered Mortgages, said last Thursday: “We have seen swap rates increase in the past 24 hours which could mean that lenders begin to increase mortgage rates towards the end of the month so the window to secure current deals could be tight.”
Read More Details
Finally We wish PressBee provided you with enough information of ( HSBC among lenders upping mortgage costs despite expected interest rate cut )
Also on site :
- A look at six bills in Albany awaiting Gov. Hochul’s signature
- Israel tried to break Iran – but it may have actually helped unite it
- This 'Iconic' Cereal is Finally Making a Comeback and Fans Going Wild: 'Holy Smokes'