Mortgage lenders had been gradually lowering prices in the last months following the ceasefire. But with oil prices back on the increase due to further turbulence in the Middle East, the likes of Coventry Building Society, Barclays, Nationwide and NatWest announced price hikes last week.
Today it has emerged Barclays is increasing rates tomorrow by up to 0.20%, Halifax is hiking by a similar amount and HSBC is also raising prices.
Meanwhile, TSB is raising residential rates and Skipton Building Society has increased its fixed rate range.
It comes following the US carrying out its ninth successive night of strikes on Iran. With this heightened turmoil the threat of higher prices at the pumps is increasing – this raises the prospect of higher inflation, which feeds into mortgage pricing.
Nicholas Mendes, mortgage technical manager at John Charcol, said Swap rates, which impact lender pricing, have been climbing since the Middle East escalated.
He explained: “Lenders price off swaps, not Bank Rate, so this is simply catching up with where funding costs already are. When a lender as prominent as Halifax moves, the rest of the market tends to fall in line within days.”
Will interest rates increase?
Whilst fixed rate pricing is not directly influenced by the Bank of England base rate, lender activity on fixed rate pricing can often be an indicator of what will happen to interest rates.
Does this flurry of price hikes ahead of the next decision on 30 July bode badly for the Bank Rate?
Mendes said: “The vote split has been drifting hawkish, with two members already backing an immediate hike to 4%. My money’s still on a hold, but the debate inside the MPC tells you which way the risk is skewed, and a rise, at this meeting or the one in September, looks more likely than a cut.”
How will these cuts impact your mortgage?
Those taking out a new mortgage or remortgage now will feel the impact of these price cuts.
According to Mendes, a 0.20% increase on a typical £200,000 mortgage over 25 years adds around £23 a month, or roughly £276 a year. On a £300,000 mortgage the same increase adds closer to £35 a month, nearly £420 a year.
“It’s not a dramatic jump on its own,” he said, “but it’s the third or fourth such move in a matter of weeks, and each one stacks on the last for anyone still shopping around.”
If your deal is ending in the next six months, his advice is to get it reserved now. He explained most lenders will allow you to switch to something cheaper if pricing improves before completion.
Using a broker is also a good idea as they will know of any price changes in advance and can advise you accordingly.
Mendes’ guidance was echoed by many other mortgage experts including Katy Eatenton, mortgage & protection specialist at St Albans-based Eatenton Finance, who was speaking to the Newspage Agency.
She said: “The mortgage price war ended just as quickly as the ceasefire. Those borrowers who were waiting for rates to get lower gambled and many will have lost.
“Now time is of the essence to get your ducks in a row and secure the lowest rates and products available.
“What’s happening to mortgage pricing once again highlights the importance of locking into a rate rather than relying on them to continue falling. Because that’s just not guaranteed.”