Already this week Coventry Building Society has announced it is raising rates from Friday and Co-operative Bank is pulling some of its lowest-priced deals on Thursday evening.
It is thought more lenders, especially specialist providers, are likely to follow.
The price hikes have come just days after the Bank of England governor Andrew Bailey said it would take an ‘aggressive’ stance on interest rate cuts if inflation continued to fall.
Not all members of the Bank of England’s decision-making committee appeared to share this view. Meanwhile, the looming Budget, global unrest particularly in the Middle East and rising swap rates – which lenders use to set their pricing – have all combined to create uncertainty in the market. And this is filtering through to mortgage lenders.
David Hollingworth, associate director at broker L&C Mortgages said: “The mortgage market has seen rates falling in recent months but that may be coming to an abrupt halt.
“Fixed rate pricing depends on what the market anticipates may happen to interest rates and uncertainty over the forthcoming budget, mixed messages from the Bank of England and global unrest is pushing costs back up for lenders.
“Swap rates are a good indicator of the direction of fixed rate pricing and they have bounced back up. If that persists, fixed rate improvements will be brought to an abrupt halt and edge back up.”
Advice to borrowers due to remortgage
Hollingworth said it’s not just Coventry and the Co-op which have announced rate hikes – other specialist lenders had also started to adjust rates upwards in recent days, he revealed.
“Borrowers may have been lulled into a false sense of security with round after round of rate improvements but this is a reminder that things can change,” he said.
“This isn’t a cause for panic but those that have been tempted to wait for lower rates may want to consider locking into a deal in case we see further increases. If expectation eases again it’s still possible to review rates.”
Will the Bank of England cut interest rates in November and December?
The next Bank of England interest rate decision is due on Thursday 7 November. The outcome remains uncertain considering the differing views which have been expressed amongst the decision makers, the Monetary Policy Committee.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “Markets had been pricing in rate cuts for November and December, but expectations for December have softened slightly, reflecting this uncertainty.”
He added: “We expect to see some lenders begin to reprice their products particularly among specialist lenders (Aldermore and Keystone have) and smaller building societies.
“If swap rates continue to rise, it’s likely that the lower loan-to-value (LTV) best mortgage deals which are already slim in margins for lenders will start to reprice with slight adjustment upwards, with more widespread repricing if competitors do the same.
“Lenders typically price a fortnight in advance, so any repricing is likely to happen in advance of the budget [on Wednesday 30 October] if this trend continues.
“Any uptick in mortgage rates will likely be temporary and not necessarily reflect the overall trajectory of rates over the next 12 months.”
Mendes echoed Hollingworth’s advice to those nearing the end of their fixed-rate deal. He urged people to fix their rate now.
“Continuously review the market, or better yet, use a broker who can monitor it for you and advise when a better deal becomes available,” he said.
“While nothing is guaranteed, and various factors may delay the passing on of rate reductions, it’s important to take proactive steps to secure the best deal, rather than adopting a ‘wait and hope’ approach.”
