UK homeowners dealt fresh blow as mortgage rates set to increase amid Middle East conflict
Mortgage rates are expected to rise with many lenders signaling increases, while others are expected to follow due to changing market conditions.
HSBC UK will increase some of its offers from Friday, affecting first-time homebuyers, house movers, remortgagers and buy-to-let homeowners.
Coventry Building Society is also set to increase its rates from Monday.
These adjustments are due to increased interchange rates that lenders use to set mortgage prices.
A statement from Coventry Building Society said: “Mortgage pricing is closely linked to swap rates and as these rates have moved in recent days we have had to adjust some of our mortgage rates.
“As our rates increase, we are committed to offering competitive options to people looking for a new mortgage deal.”
David Hollingworth, deputy director at L&C Mortgages, said: “We are now seeing the first big name lending moves starting to have an impact.”
He added: “The conflict in the Middle East has led to market expectations of higher inflationary pressures, which could lead to rate cuts being slowed or delayed. This is increasing the costs for lenders when pricing fixed-rate mortgages, which could lead to higher rates.”
“We know that when we get into this cycle of lenders adjusting interest rates, it will almost always result in others doing the same.
“Current uncertainty means this upward pressure is unlikely to ease quickly, but there are signs that the market reaction is stabilising, at least for now.
“In the short term, these increases are unlikely to cause mortgage costs to rise rapidly, but the improvements made in recent weeks seem likely to be resolved quickly.
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“In such an unpredictable environment, borrowers currently considering a new fixed rate deal should look to secure the interest rate sooner rather than later.”
Average two- and five-year fixed homeowner mortgage rates on the market rose slightly from the previous day, financial information site Moneyfacts said Thursday morning.
The average two-year fixed-rate homeowners mortgage rate rose from 4.82% Wednesday morning to 4.83% Thursday morning.
The average five-year fixed-rate homeowners mortgage rate rose from 4.94% Wednesday morning to 4.95% Thursday morning.
Moneyfacts on Wednesday said some lenders had already paused planned mortgage rate cuts amid wider economic and global uncertainties as the conflict in the Middle East continues.
The website said it was aware that some lenders, which it did not name, were reconsidering planned rate cuts.
Adam French, head of consumer finance at Moneyfacts, previously said: “Some lenders have already paused or reconsidered planned rate cuts.
“As fixed mortgage pricing is closely linked to swap rates, this sudden market move risks stalling the recent momentum towards lower mortgage rates just as borrower confidence begins to increase ahead of the expected rate cut.
“This is a stark reminder that mortgage costs are not driven solely by domestic policy decisions.
“Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals offered to borrowers—all while the world watches deeply disturbing events unfold.”
Nicholas Mendes, technical director of mortgages at John Charcol, said: “From a mortgage perspective the most important thing for borrowers at the moment is that periods of geopolitical tension tend to fuel financial markets rapidly.
“We have already seen swap rates moving as markets reassess inflation risks and the likely path of Bank of England interest rates.
“These swaps support fixed mortgage pricing, so when they move they could impact the direction of mortgage rates.”
He added: “Periods of market volatility can lead lenders to adjust prices quickly, so borrowers approaching a purchase or remortgage may want to keep a close eye on rates.
“Securing a rate early can provide some degree of protection because most lenders allow borrowers to switch to a lower rate before completion if pricing improves.
“This flexibility means many borrowers choose to lock in something while keeping their options open.”
