- Major UK lenders have started raising fixed mortgage rates after higher market borrowing costs.
- A typical £200,000 mortgage could now cost borrowers about £480 more a year on some deals.
- Brokers say homeowners nearing the end of a fixed term may want to secure a new rate before further increases.
The recent run of cheaper UK mortgage rates is beginning to reverse, with several of the country’s biggest lenders increasing the cost of fixed home loans as financial market volatility feeds through to borrowers.
Barclays, NatWest, Nationwide, Coventry Building Society and Virgin Money have all started raising fixed mortgage rates this week after a sharp rise in swap rates, the market benchmark banks use to price fixed-rate mortgages. The changes come after months of easing mortgage costs and are expected to affect both homebuyers and homeowners looking to remortgage.
The increases vary between lenders, with some fixed-rate deals becoming up to 0.35 percentage points more expensive. One example is Nationwide’s two-year fixed mortgage, which has risen from 4.24 per cent to 4.59 per cent. On a £200,000 mortgage over 25 years, that would add around £480 a year to repayments.
Global tensions ripple into UK mortgages
Mortgage pricing has been pushed higher as rising geopolitical tensions have unsettled financial markets.
According to brokers and finance specialists, renewed conflict in the Middle East has driven up UK swap rates, making it more expensive for lenders to offer fixed-rate loans. Two-year swap rates climbed from 3.95 per cent on June 26 to 4.22 per cent this week, reversing the downward trend seen earlier in the year.
Rachel Springall, finance expert at Moneyfacts, reportedly said borrowers are likely to be disappointed by another rise in mortgage costs, adding that lenders often react quickly when swap rates increase.
David Hollingworth, associate director at L&C Mortgages, reportedly said a series of rapid pricing changes could indicate that more lenders are preparing to increase rates. He suggested borrowers approaching the end of their fixed-term deals may want to secure a new mortgage now, while retaining the option to switch if rates improve before completion.
Not every borrower is out of options
Although fixed-rate mortgages are becoming more expensive, brokers say borrowers still have alternatives.
Aaron Strutt, product director at Trinity Financial, reportedly said many customers continue to choose two-year fixed deals priced at around 4.3 per cent, while others are opting for tracker mortgages below 4 per cent in the hope that the Bank of England cuts the base rate, currently 3.75 per cent, later this year.
Tracker mortgages are also attracting attention because they generally allow borrowers to move to a fixed-rate deal without early repayment charges if better offers become available.
Some lenders are also adjusting their lending criteria rather than simply increasing prices.
Nationwide has lowered the minimum income needed for customers seeking mortgages worth up to six times their salary. Borrowers earning £75,000 can now qualify for the higher loan-to-income ratio, compared with the previous threshold of £100,000.
Meanwhile, Lloyds has launched lower-priced mortgage deals for Premier account holders earning £100,000 or more. Eligible first-time buyers and home movers can access fixed-rate products starting from 4.13 per cent, suggesting competition remains strong for higher-income borrowers even as the wider mortgage market becomes more expensive.