Virgin Money has increased mortgage rates today bucking the trend seen last week when two major lenders made price cuts.
It has hiked prices on a number of its two- and five-year fixed rates for house purchases by 0.20% and has made similar increases to some remortgage deals.
It comes after HSBC and first direct reduced mortgage rates last week and as Moneyfacts reported average product rates had dipped slightly in early 2025.
But with swap rates, which are used by lenders to set prices, rising it will come as no surprise to the market that Virgin has made the rate hikes this week.
Frances Haque, chief economist at Santander UK, said: “This month, we’re already seeing swap rates edge up as they respond to volatility in the bond market, caused by an uncertain economic outlook for 2025 both at home and abroad.
“As such, lenders may well – in the short-term – nudge up pricing to reflect the higher swaps.”
Haque said whilst borrowers can expect rate cuts this year, as the Bank of England is expected to reduce the Base Rate in 2025, they should not expect major price cuts straight away.
“Our own forecasts continue to expect a further four cuts over the course of this year,” she said, “with base rate ending the year at 3.75%, and remaining between 3% to 4% for the foreseeable.”
The average two-year fixed residential mortgage rate today (Tuesday 14 January 2025) is 5.49%, according to Moneyfacts. This is up from 5.48% from yesterday. Five-year fixed rates have also climbed from 5.26% yesterday to 5.27% today.
Nicholas Mendes, mortgage technical manager at John Charcol, said more lenders may increase their prices.
“While most lenders have not significantly raised their rates in response to recent increases in swaps, the pressure to do so is mounting,” he said.
“Swap rates, which heavily influence mortgage pricing, have been steadily increasing, narrowing the gap between them and the lower LTV best mortgage deals available.”
He added: “If swap rates continue to rise, it’s inevitable that mortgage rates will have to give at some point, as lenders cannot absorb higher costs indefinitely.
“For now, borrowers should look to act quickly and observe the trends while lenders take a cautious, wait-and-see approach, likely hoping that recent market movements are a short-term blip in sentiment.”
