Nationwide mortgage rates increase by up to 0.45% as market reacts to inflation figures
Mortgage rates rise nationwide: Expert says those with fixes ending should talk to a broker NOW as base rate lender price rises to 5.5%
- Swap interest rates have risen sharply over the past week, impacting mortgage prices
- The Bank of England is expected to continue raising its key interest rates to curb inflation
Nationwide has raised its fixed and tracker mortgage rates by up to 0.45 percent as the market price in base rates rises to 5.5 percent.
On Thursday, the lender announced that rates would increase starting Friday, May 26, including selected rates for its new business and mover ranges.
Those looking for a loan at the current rates must reserve a product before 8 p.m. today.
The market is reacting to UK inflation remaining higher than expected at 8.7%, raising expectations that the Bank of England will continue to raise interest rates – the only tool in its arsenal to try to bring down rising costs .
Up: Nationwide raises mortgage rates by up to 0.45% as swap rate changes drive up borrowing costs
As a result, markets now expect base rates to rise to 5.5 percent later this year. It currently stands at 4.5 percent after the central bank’s Monetary Policy Committee raised it by 0.25 percent earlier in May.
Since the inflation announcement, swap rates – the mechanism most lenders use to set their fixed rates – have risen and this is reflected in mortgage prices.
In addition to Nationwide’s rate hikes, Fleet Mortgages has temporarily withdrawn all fixed rate products and says it will relaunch in the coming days.
Nicholas Mendes, mortgage technical manager for broker John Charcol, said: ‘Anyone within six months of their fixed rate ending, or planning to apply for a new mortgage, should talk to their entire market broker as soon as possible to get a rate or be prepared to sit it out for a few months expecting rates to start falling later this year or early next year.
“While some may argue that the markets are wrong, unfortunately that does not preclude the way markets have reacted and taking into account future increases, which has driven up swap rates, which has affected the way lenders set fixed rates.’
Lenders hedge money in batches, which allows them to lend out all the funds in one batch at a certain price, as they are protected against fluctuations in borrowing rates.
Rate hikes: Mortgage rates have fallen after the peak, but are subject to fluctuating swap rates
However, once that money runs out, they have to hedge more funds to lend and price accordingly to protect against losses.
“I expect we will see changes in the coming days,” says Mendes. “If lenders have already used up purchased funds, I suspect we’ll see 2- and 5-year deals closer to 5 percent.”
The current average rate for a two-year fixed-rate mortgage is 5.34 percent, according to Moneyfacts. The five-year average with a fixed interest rate is 5.01.
First Direct is currently offering a five-year fix at 4.04 percent, with Natwest offering the same deal.
For those with a smaller deposit, First Direct is currently offering a 4.44 percent deal for a 10 percent mortgage, and Principality Building Society is offering 4.45 percent for the same deposit.
Carl Watchorn, head of mortgages at First Direct, told This is Money: “We can expect some more volatility in mortgage prices in the coming weeks due to the ongoing interest rate speculation.
“During the mini-economic crisis in September, we remained consistent in the market with products across all segments to ensure we can support homebuyers. And we have no plans to withdraw from the market at this time.”