Multiple major banks including Halifax, Santander, HSBC, and Nationwide have upped mortgage rates – or announced plans to do so.
Halifax – Britain’s biggest lender – will up rates by up to 0.18 percentage points from Tuesday morning, which is its second increase to rates in a week.
Nationwide is increasing its rates by up to 0.3 percentage points on Tuesday, while HSBC will also up prices and Santander will do so on Wednesday.
Below, we look at why rates are rising, what to do if you’re remortgaging, and what experts expect will happen next.
How high have mortgage rates gone?
The average two-year fixed mortgage rate is now is 5.68 per cent and the average five-year deal is 5.73 per cent, according to data firm Moneyfacts.
This compares to 5.47 and 5.49 per cent for each type of deal respectively two months ago.
You can still get cheaper rates, but broadly the best deals are disappearing, and all the best rates available to most buyers or homeowners are above 4.5 per cent.
If you have a fixed mortgage deal – by far the most popular type – you pay a set price for a fixed period of time, which is usually two or five years.
Why are rates going up?
Experts say that rising oil prices, and the impact they will have on inflation and interest rates, are driving the increase in mortgage costs.
Oil prices are now above $100 a barrel, and there are fears this could feed through to high prices for consumers later this year.
This is raising fears that the Bank of England will raise interest rates multiple times in the next year, to combat inflation, which is impacting swap rates – a type of rate banks charge to each other.
These swap rates feed into mortgage pricing, with higher swap rates generally meaning higher mortgage rates.
Higher oil prices are being driven by the situation in the Middle East, which experts say is getting worse.
Peter Stimson, director mortgages at MPowered, said: “It’s the oil price which is driving events. The markets are really worried now not just about the seemingly unending Iran war but now recent events in and around Saudi and Yemen.”
“Oil supply is threatened still further as we approach the all important winter season when demand is set to rise,” he added.
“A sustained oil price rise pushes up inflation expectations, and it’s those inflation expectations, not the oil price itself, that feed into swap rates, which is what lenders price fixed mortgages against,” explained Nick Mendes of John Charcol brokers.
What will happen next?
The bad news for mortgage borrowers is experts think the situation will get worse before it gets better.
“Many lenders are poised to make further hikes this week,” explains Adam French, head of consumer finance at Moneyfacts.
“Mortgage rates had only just caught up with a previous increase in the swap rates which underpin funding costs, and now lenders are facing another wave of pressure as money markets adjust to rising oil prices, volatile bond markets and gloomier inflation expectations. Borrowers need[to] be prepared for further rate increases in the near term unless swap rates fall back significantly,” he added.
Lewis Shaw, a mortgage broker at Shaw Financial Services, said he also expected rises to continue.
“Swaps are continuing to rise, and the issue is that they can set off a chain reaction: lenders get swamped with business as people try to secure rates, which then pushes them to reprice to get out of the way.
“Unless the war in Iran gets nipped in the bud, there is no way we get back to anything like a normal housing market for the rest of this year, and potentially most of 2027,” he added.
What to do now
If your mortgage deal is ending in the next few months, brokers say the best action you can take, is to start shopping around for the best deal now.
Most lenders let you reserve a rate three to six months before your current deal ends, and switch to a cheaper one if rates fall before completion. If rates rise, you’ll have the cheaper deal locked in.
“With pricing still moving upward, there’s little reason to wait, reserving early protects against further rises without locking you out of a better deal later,” says Mendes.
If you’re buying a property, it’s worth getting the mortgage application in as soon as you can. Once a mortgage offer is issued it typically holds for six months, and similarly if rates drop, you can transition to a cheaper deal.
“Anyone whose purchase is dragging on beyond that will need to apply for an extension, and lenders generally only honour the original rate for a set period before reverting to whatever is on offer at the time,” explains Mendes.
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