If you’ve been holding off on locking in a mortgage rate, this week’s news is worth paying attention to. Five major lenders have raised their pricing in the space of a few days, and industry experts are warning that more increases could follow.
Here’s what’s happened, why it’s happening, and what it means if you’re buying, remortgaging, or just keeping an eye on the market.
Who’s raised rates, and by how much?
At the start of this week, five lenders moved to increase the cost of their mortgage products:
- Barclays raised rates by close to 0.2%, pushing its two-year fixed deal up to 5.53% and its five-year fixed to 5.48%
- TSB increased residential mortgage rates by 0.15%
- Santander, Skipton Building Society, and Nottingham Building Society also announced increases
These aren’t isolated moves. Across the market, the average five-year fixed rate has climbed to 5.68%, up from 5.64% just a few days earlier, the highest it’s been since 11 May. The average two-year fixed rate has also edged up, from 5.60% to 5.63%.
Why is this happening?
The short answer is that lenders are reacting to what’s happening in the bond and swap markets, which is where mortgage pricing ultimately comes from – not directly from the Bank of England’s base rate.
A few things are feeding into this:
Swap rate pressure. Swap rates (which lenders use to price fixed mortgage deals) have risen recently, and that increase is now filtering through into the rates being offered to borrowers. Rachel Springall of Moneyfacts summed it up simply: recent swap rate movements are pushing fixed-rate pricing up, with more changes likely in the days ahead.
Interest rate expectations. The Bank of England’s next Monetary Policy Committee meeting is on 17 September, with the base rate currently sitting at 3.75%. There’s a real possibility of a rate rise, and the Bank’s chief economist, Huw Pill, has been openly pushing for the Bank to act “clearly, promptly and decisively” – language that markets have read as a signal that action could be coming sooner rather than later.
Inflation concerns from oil prices. Brent crude has been creeping up towards $100 a barrel, driven largely by tensions in the Middle East. Higher oil prices tend to feed into wider inflation, which in turn makes the Bank of England more likely to raise rates to keep price rises in check and lenders are pricing that risk in now rather than waiting for it to happen.
Two-year gilt yields, another key input into mortgage pricing, are also sitting around 4.5%, reflecting that same nervousness in the markets.
What this means for you
If you’re currently on a variable rate, coming to the end of a fixed deal, or planning to buy in the next few months, this is the kind of environment where waiting can cost you money. Rates have a habit of moving in clusters – once a few lenders move, others tend to follow – so a deal that looks competitive today may not be there next week.
A few practical things worth considering:
- If your current deal is ending within the next six months, it’s usually worth securing a new rate now. Most lenders let you lock in a rate well ahead of your current deal expiring, and you’re not committed if a better offer comes along before you complete.
- If you’re a first-time buyer or moving home, getting your agreement in principle and full mortgage application sorted sooner rather than later means you’re not caught out by a rate change mid-process.
- Don’t panic, but don’t dawdle either. Rates rising doesn’t mean the market has closed – it means the window for today’s pricing may be narrower than it was last month.
Talk to us before you decide anything
Every borrower’s situation is different, and with lenders moving at different speeds and by different amounts, the right deal for you depends on your circumstances, your deposit, and your timeline. If you’d like to talk through your options – whether that’s securing a rate now, understanding what a Bank of England move on 17 September could mean for you, or just getting a clearer picture of where things stand – get in touch with the team at Pure Mortgage and we’ll talk you through it.
Sources: City AM, Moneyfacts.
