Borrowers wavering over whether to move now on remortgages or home purchase mortgages are being advised to act sooner rather than later as more lenders may follow suit.
On Monday (22 April) Natwest, HSBC, Leeds Building Society and Accord (the intermediary arm of Yorkshire Building Society) announced they were increasing rates, with most price changes coming into effect tomorrow (Tuesday, 23 April).
Rising SWAP rates, which are what lenders use to set their prices, are being attributed to the flurry of rate rises.
Indeed, with a cut to interest rates looking less likely in the short term, the markets are preparing for higher rates in the next few months.
Andrew Montlake, managing director at Coreco, speaking via the Newspage Agency, said: “Recent escalations in SWAP rates, which have shown a stubborn reluctance to decrease, have compelled lenders to make adjustments.
“It appears we are on the cusp of witnessing a series of rate hikes as lenders who previously held steady are now compelled to respond to the increasing pressures.”
He added: “While this turn of events may seem disheartening for borrowers, there remains a strong conviction that forthcoming inflation reports could serve as a counterbalance, potentially reversing the current trend of rate increases.
“Nonetheless, as experience teaches us, attempting to time the market can be risky. For many borrowers and potential homebuyers, making decisions sooner rather than later could prove to be most advantageous.”
Will interest rates rise or fall?
The Bank of England’s (BoE) base rate is currently at 5.25%, where it has been on hold since August 2023. It hit this level following months of consecutive hikes which the BoE instigated in order to reduce inflation which had, at one point, soared above 11%.
Although inflation has nearly come down to it’s target of 2%, at 3.2% it is still not quite at the level economists had hoped.
This, combined with other factors such as events in the middle east, is creating uncertainty around what might happen to rates. Some experts say a cut will take place in June, others say it could be as late as September.
There has even been some speculation rates could rise.
Tracey Dixon, broker at Pure Mortgage and Protection, who was also speaking via the Newspage Agency, said: “The lack of a predicted base rate cut creates uncertainty in the long-term borrowing landscape. It’s difficult to say definitively if rates will continue to rise or stabilize.
“This might make borrowers cautious about taking on large debts like mortgages.”
She added: “The long-term picture is less clear. If the base rate increases do happen, it might eventually lead to a more stable economy, potentially benefiting borrowers in the long run. However, there’s also a risk of a slowdown in economic growth, which could limit borrowing opportunities.
“The next few months will be crucial in seeing how the base rate situation unfolds and its eventual impact on borrowing costs.”
Update on Tuesday 23 April: Following the FTSE100 hitting a record high and closing above 8,000 on Monday, the financial markets were pricing in two interest rate cuts this year – the first most likely in August.
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