Several of the UK’s biggest mortgage lenders have announced plans to raise their rates this week, as interest rates on home loans continue to rise.
Santander, NatWest, Co-op Bank and Principado Building Society have announced they will increase rates.
The most notable is Santander, which currently offers the cheapest two-year solution (4.53 percent) and the second cheapest five-year solution (4.17 percent) on the market.
Starting tomorrow, several of its fixed rates for purchase and remortgage customers will increase by between 0.06 and 0.43 percentage points.
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The commission-free two-year fixed rate deal for those buying with a 40 per cent deposit will increase from 4.77 per cent to 4.92 per cent.
On a £200,000 mortgage repaid over 25 years, that would mean the difference between paying £1,143 and £1,160 a month.
This marks a considerable change from the sub-4 per cent rates Santander was offering almost three weeks ago.
Santander also said all of its residential tracker rates would increase by between 0.06 and 0.43 percentage points.
The rest of the rate hikes, as well as a small number of rate reductions, will be announced tomorrow.
Some of its deals targeting those with smaller deposits or capital levels will be removed.
Santander is also cutting all its fixed buy-to-let rates by between 0.09 and 0.23 percentage points, which will be a boost for landlords.
Meanwhile, NatWest is increasing rates for existing customers looking to switch to a new NatWest mortgage. The increases will apply to both owners and landlords.
Halifax also announced today that several of its fixed rates would rise by up to 0.2 percentage points from Wednesday.
Intermediaries Cooperative Bank also announced a series of rate changes, including increasing its fixed-switch mortgages product by up to 0.72 percentage points.
Its change corrections for buy-to-let products are also increasing by up to 1.09 percentage points.
Speaking to news agency Newspage, Justin Moy, managing director of EHF Mortgages, said: ‘Further disappointment in the mortgage market, with some large lenders raising rates this week.
‘This is a huge blow for borrowers, especially as we rapidly approach the most important time of year for buying and selling property.
“Rates have to come down, and come down quickly, to rescue both the economy and the housing market.”
When could mortgage rates fall?
The changes announced today continue an upward trend in mortgage rates since early February.
Just a month ago, the lowest five-year fixed rates were below 4 percent and the lowest two-year fixed rates were just above 4 percent.
Rates have risen again due to a change in market expectations for the Bank of England’s base rate, which currently stands at 5.25 per cent.
The base rate is important because it determines the rate of interest paid on reserve balances held by commercial banks at the Bank of England.
Therefore, by setting the base rate, the Bank of England can control short-term market interest rates.
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At the beginning of the year, the market expected six or seven base rate cuts in 2024 alone.
Now, the market expects the base rate to be cut about three times this year to around 4.5 percent in December.
Looking ahead, markets are currently only pricing in a base rate that will fall to around 3.8 percent by the end of 2025 before eventually reaching 3.5 percent in 2027.
When the base rate begins to fall, this can generate good signals for the industry, meaning interest rates could fall further.
But that doesn’t necessarily mean there will be significant rate cuts on all fixed rate products right away due to the fact that lower rates have already been priced in because there is already an expectation that rates will fall.
For mortgage borrowers, these market expectations are reflected in Sonia’s swap rates.
In the simplest terms, swap rates show what lenders believe the future holds with respect to interest rates, and this governs their prices.
As of today, five-year swaps were at 3.88 percent and two-year swaps were at 4.49 percent, both trending below the current base rate. The cheapest mortgage rates rarely fall below swap rates.
Given this, swap rates will likely have to fall before mortgage lenders begin to significantly undercut their prices.
Rohit Kohli, director of The Mortgage Stop, said: “It appears that lenders are thinking that any cut in the base rate will not come until the end of this year, which will worry the thousands of people who were expecting the Bank of England to take action.” some measures”. form of action in the coming weeks when their fixed rates come to an end.
Nicholas Mendes, mortgage technical manager at broker John Charcol, noted that five-year swaps have fallen from more than 4 percent to 3.87 percent in the past two weeks, suggesting this could tempt some lenders to cut. rates in the short term.
“Five-year money has fallen in recent days, which will cause a positive reversal in five-year fixed rate prices over the next fortnight,” he said.
‘The market needs some stimulus, no matter how small. A rate cut of 0.1 percentage point will provide enough confidence in the future movement of bank rates to price more favorably, although it seems likely that it will be June before we see the first rate cut.
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