Nationwide hikes rates amid sell-off sparked by inflation fears

Britain’s largest mortgage bank rushed to raise mortgage rates yesterday amid a bond market sell-off fueled by renewed fears of high inflation.

Nationwide announced an increase of up to 0.45 percentage points for some fixed and tracker mortgage products from today, adding hundreds of pounds in annual repayments.

It responded to rising interest rates in financial markets gripped by turbulence reminiscent of the collapse during Liz Truss’s short-lived premiership.

“It feels kind of eerie like the post-mini-Budget period last year,” said Jamie Lennox, director of mortgage broker Dimora.

Nationwide said market interest rates “continue to fluctuate and, more recently, rise, leading to interest rate hikes,” adding, “This change ensures that our mortgage rates remain sustainable.”

Nationwide announced an increase of up to 0.45 percentage points for some fixed and tracker mortgage products from today – adding hundreds of pounds in annual repayments

It responded to rising interest rates in financial markets gripped by turbulence reminiscent of the collapse during Liz Truss’s short-lived premiership (pictured)

UK bond yields, also known as gilts – the yield investors demand on loans to the government – ​​are on course for the biggest increase since 2008, excluding the mini-budget.

Two-year Treasuries hit 4.55 percent yesterday, ten-year bonds at 4.38 percent — both recently under 3 percent.

These help determine the rates offered by mortgage lenders, with Virgin Money raising select rates by 0.12 percentage points and Halifax announcing increases of up to 0.2 percentage points on some fixed rate remortgages.

John Cronin, at stockbroker Goodbody, said other lenders are likely to follow Nationwide’s lead, adding that “loan customers will get higher prices.”

It marks a period of turmoil that parallels the aftermath of Kwasi Kwarteng’s disastrous mini-budget last fall, when a collapse in the bond market resulted in a rise in mortgage rates.

After Mr Kwarteng’s plans were scrapped by his successor Jeremy Hunt, markets calmed down and mortgage rates fell.

Mr. Hunt insists he is sticking to that plan and opposes renewed calls for tax cuts. But that hasn’t stopped bond markets from going haywire, forcing homeowners to pay the price once again.

Markets are reacting to the likelihood that the Bank of England will raise interest rates more than feared.

After Kwasi Kwarteng’s mini-budget plans were swept aside by his successor Jeremy Hunt, markets calmed down and mortgage rates fell

Mr Hunt (pictured) insists he is sticking to that plan and opposes renewed calls for tax cuts. But that hasn’t stopped bond markets from going haywire, forcing homeowners to pay the price once again

Those expectations were bolstered this week by data showing that while inflation fell below 10 percent for the first time since last summer, it is falling much more slowly than hoped.

And the Bank will likely be particularly concerned about a measure of “core” inflation – which excludes food and energy prices – rising to its highest level in 30 years.

That suggests that price increases that were initially driven by factors such as the war in Ukraine may be becoming entrenched in the economy.

The broader economic outlook is brighter as the IMF scraps its recession warning for Britain this week.

But even that has a dark side for borrowers, as the Bank of England is less likely to worry that rate hikes will hold back GDP. Markets now expect bank interest rates to rise to 5.5 percent later this year.

David Hollingworth, of mortgage broker London & Country, said deals of less than 4 per cent on fixed-rate mortgages were “already a reminder”, adding: “Borrowers considering fixed-rate will want to act quickly.”