A slew of mortgage lenders today raised their interest rates in response to the escalation of the conflict in Iran and the resulting chaos in bond markets.
Barclays, Santander, Skipton, TSB and the Nottingham Building Society have all announced they are raising interest rates on their fixed mortgages, often in the region of 0.15 percentage points.
Coventry Building Society was the first to emerge last week, announcing interest rate increases full range of fixed rates Mortgages on Friday.
Others, including NatWest and HSBC, raised rates earlier this month, and it is expected rates could rise further in the coming days and weeks.
Fears interest rates may have to rise because of inflation caused by a resurgence of conflict between the US and Iran in the Middle East, have led to a period of turmoil in global bond markets.
Yields on 30-year government bonds, also known as government bonds, reached their highest level since 1998 at 5.94 percent in the middle of last week, while 10-year government bonds reached 5.26 percent, the highest level since the 2008 financial crisis.
This increased expectations that the Bank of England will raise interest rates, which has rubbed off on investors who demand higher returns to buy bonds.
This has gone up mortgage interest because higher interest rates on government bonds increase borrowing costs for banks, and they pass this on to their customers.
Mortgage pressure: Interest rates have risen in recent days due to the bond market turmoil
Today, the average two-year fixed mortgage rate is 5.63 percent, up from 5.6 percent on Friday, according to interest rate monitor Moneyfacts.
The average five-year interest rate is 5.68 percent, up from 5.64 percent on Friday.
An increase of 0.25 percentage points on a typical two-year fixed rate mortgage would add around £38 to monthly mortgage repayments, or £456 per year, based on a rate of 5.63 per cent, rising to 5.88 per cent.
This assumes that the household borrows £250,000 over 25 years.
The cheapest rates available for those with the largest deposits or shares are in the region of 4.5 percent.
Rachel Springall of Moneyfacts said: ‘Borrowers expecting mortgage rates to fall in the coming weeks have had their hopes dashed.
‘The protracted conflict increases the chances for the Monetary Policy Committee to vote in favor of an increase in the Bank of England’s base rate.
‘However, according to economists, this will not happen until November.
‘Regardless of any changes to the base rate, it is still vital that borrowers do not wait to seek advice to navigate the mortgage maze.’
Nicholas Mendes, mortgage technical manager at John Charcol, advised homeowners who needed to remortgage in the next six months to secure a deal as quickly as possible.
Normally it is possible to do this up to six months before the end of your current tariff, and to switch to another tariff if the situation improves.
Mendes said: “Having a deal in place provides protection if prices move further against you, and if rates improve before completion, there is often still the opportunity to reassess the product.”
There are also concerns that the rise in mortgage rates could further slow down the lagging real estate market.
House prices have recorded their first annual decline since 2023According to the latest figures from Lloyds, turnover is down 0.4 percent.
Justin Moy, managing director at estate agent EHF Mortgages, said: ‘Higher mortgage rates will always slow down the property market, especially when certain sectors and locations in Britain are already struggling.’
