Several mortgage lenders are set to raise rates as the war in the Middle East begins to hit markets.
HSBC, Nationwide and Coventry Building Society have all announced higher mortgage rates due to come into effect in the next few days.
HSBC UK will increase some of the mortgage rates it is offering from Friday, including for first-time buyers, home movers, people re-mortgaging and buy-to-let landlords.
Nationwide Building Society is also pushing up some mortgage rates it is offering from Friday, including for some first-time buyers, home movers and people switching and remortgaging.
Coventry Building Society is also set to increase its mortgage rates on Monday.
David Hollingworth, associate director at L&C Mortgages said: ‘We are now seeing the first big name lender moves begin to feed through.
‘The conflict in the Middle East has led to market expectation of higher inflationary pressure causing rate cuts to be slowed or put on hold. That pushes up the cost for lenders when pricing their fixed-rate mortgages, which can force rates higher.
‘Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit.
HSBC, Nationwide and Coventry Building Society have all announced higher mortgage rates set to come into effect in the next few days following the conflict in the Middle East
‘The current uncertainty means that this upward pressure doesn’t look likely to ease quickly, although there are signs that the market reaction is at least levelling off for now.
‘In the short term it’s likely that these increases will not see mortgage costs rocket but it does look like the improvements made in recent weeks could unwind quickly.
‘With such an unpredictable backdrop those borrowers that are considering a new fixed-rate deal at the moment should be looking to secure the rate sooner rather than later.’
The increase in mortgage rates comes following an increase in ‘swap rates’. This is the interest rate that banks pay to secure money for mortgages. When they go up, mortgage rates go up.
War, such as the conflict in the Middle East, can raise uncertainty and increase swap rates due to fears of inflation – this was seen during the Russian invasion of Ukraine.
A statement from Coventry Building Society said: ‘Mortgage pricing is closely linked to swap rates, and as these have moved in recent days we’ve had to adjust some of our mortgage rates too.
‘While our rates will be increasing, we remain committed to offering competitive options to people looking for a new mortgage deal.’
Lenders fears inflation risks as the cost of energy and petrol are likely to rise in the coming days and months
A Nationwide spokesman said: ‘We keep our mortgage rates under continual review to ensure we reflect market changes.
‘Like other lenders, we are having to increase rates following a significant rise in swap rates as a result of recent global events. However, our increases are more limited than the swap rates rise and we continue to support existing customers with our pricing pledge.’
Financial information website Moneyfacts said this morning that average two and five-year fixed homeowner mortgage rates on the market had edged up compared with the previous day.
The average two-year fixed-rate homeowner mortgage rate on Thursday morning was 4.83 per cent, up from 4.82 per cent on Wednesday.
The average five-year fixed-rate homeowner mortgage rate on Thursday morning was 4.95 per cent, up from 4.94 per cent on Wednesday.
Some lenders had already paused planned mortgage rate cuts, amid wider economic and global uncertainties as the conflict in the Middle East unfolds.
Adam French, head of consumer finance at Moneyfacts, said previously: ‘Some lenders have already paused or reconsidered planned rate reductions.
‘Because fixed mortgage pricing is closely linked to swap rates, this sudden market movement risks halting the recent momentum towards lower mortgage rates just as borrower confidence had begun to build ahead of an anticipated rate cut.
‘It serves as a stark reminder that mortgage costs are not driven solely by domestic policy decisions.
Some lenders had already paused planned mortgage rate cuts, amid wider economic and global uncertainties as the conflict in the Middle East unfolds
‘Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.’
Nicholas Mendes, mortgage technical manager at John Charcol said: ‘From a mortgage perspective the key thing for borrowers right now is that periods of geopolitical tension tend to feed quickly into financial markets.
‘We’ve already seen that with swap rates moving as markets reassess inflation risks and the likely path of Bank of England interest rates.
‘Those swaps underpin fixed mortgage pricing, so when they move it can influence the direction of mortgage rates.’
He added: ‘Periods of market volatility can lead to lenders adjusting pricing quickly, so borrowers who are approaching a purchase or remortgage may want to keep a close eye on rates.
‘Securing a rate early can provide a degree of protection because most lenders allow borrowers to switch to a lower rate before completion if pricing improves.
‘That flexibility means many borrowers choose to lock something in while keeping their options open.’
Hina Bhudia, a partner at Knight Frank Finance, said: ‘HSBC and Nationwide are unlikely to be the last lenders to move, given the shift we’ve seen in swap rates since the weekend.
‘When the major high street banks adjust pricing it often sets the direction of travel for the wider market, so further increases across other lenders would not be surprising.
‘The housing market entered the year with improving sentiment, but higher mortgage pricing could start to dampen activity just as the traditionally busy spring selling season gets under way.
‘For borrowers who are able to secure a rate now, there is a strong case for doing so. Mortgage offers can usually be renegotiated if rates begin to fall again, although that scenario appears unlikely in the immediate term.’