Lenders hike mortgage rates – how will it affect you?

3 min Read Published: 24 Apr 2024

Lenders hike mortgage rates - how will it affect you?A number of lenders have announced mortgage rate increases this week after the latest UK inflation rate came in higher than expected. While some of the increases are small, the movement will likely worry homebuyers and those looking to remortgage from existing mortgage deals that are soon to expire.

We explain the most recent announcements, why mortgage rates are going up, how this affects borrowers, what you should do, and how to source the best mortgage deals.

Which lenders are increasing mortgage rates and which deals are affected?

Among the lenders to announce mortgage interest rate hikes are HSBC, Barclays and NatWest. Smaller lenders including Accord Mortgages, The Co-operative Bank and Leeds Building Society have also announced rate changes over the last week.

HSBC announced increases in interest rates on a wide range of purchase and remortgage products for home movers, buy-to-let borrowers and first-time buyers. Uncertainty is further fuelled by the fact that this is Barclays' second mortgage rate increase in a matter of days.

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Why are mortgage rates increasing?

Swap rates, which influence fixed-rate mortgages, are the rates at which banks will lend to each other and these have been increasing in recent weeks. This is because mortgage lenders are less confident that the Bank of England will be able to cut the base rate, which influences swap rates, as early as previously thought due to inflation falling less than expected. The latest official UK inflation data showed that inflation fell from 3.4% to 3.2%, as measured by the Consumer Prices Index, for the 12 months to March 2024. The Bank of England has an inflation target rate of 2% and in order to bring high inflation back towards its target the Bank of England can raise the base rate, as it has done on fourteen occasions since December 2021. While the lenders may not be anticipating any further base rate increases from the Bank of England they anticipate that the Bank of England will not be able to cut its base rate until later in 2024, for fear of stoking inflation.

What do the rate increases mean for borrowers?

As an example, the interest rate on a 60% loan-to-value (LTV) purchase mortgage with HSBC over a 2-year fixed term has increased from 4.63% with a product fee of £1,016 to 4.83% with a product fee of £999. The increase would mean the monthly payment for a £200,000 mortgage over 25 years would increase by around £22 assuming it is arranged on a repayment basis. The overall mortgage rate increases across the stated lenders are as much to 0.4 % which means that some sub-4% mortgage deals may breach 5% again.

However, some of the best rates in our top mortgage deal tables came from other lenders such as Lloyds, Santander and Nationwide which have not increased their mortgage rates. It means that there is still scope for borrowers to secure better mortgage rates by shopping around.

Borrowers waiting for mortgage rates to reduce may find they will have to wait a little longer as the Bank of England is likely to make its first base rate cut later than expected this year. While some experts had predicted that the Monetary Policy Committee (MPC) could vote for a base rate cut ahead of the summer, it is now unlikely that this will happen until September.

How to find and secure the best mortgage rates

First-time buyers and movers may find that the number of affordable deals has shrunk and the need to shop around is greater to secure the best rates. If you have already received a mortgage offer then it is worthwhile checking how long your lender will hold the rate before you complete.

Borrowers who have yet to secure a mortgage should search the market for the best rates based on their personal needs. Although product fees are not always applicable, it is worth comparing the effect of these on the overall cost of your mortgage, especially if you intend to add the fees to your mortgage loan. In some cases, lenders may offer a cashback incentive and this would have a positive effect on the overall cost of your mortgage. You can find the best mortgage deals based on the amount you need to borrow and all the associated costs using our mortgage rate comparison tool.

Searching the mortgage market is a cumbersome job especially when rates are changing and not all mortgage deals are available to customers directly - some mortgage deals are only available through a mortgage intermediary. To enlist the help of an expert and gain access to broker-only mortgage deals, you should speak to a mortgage broker.

If you do not have a mortgage broker, you can source one in your local area using the professional directory services provided by Vouchedfor*. You can select a mortgage broker using the directory's filtering options and based on other customers' experiences of using their service.

Alternatively, contact Habito*- one of the first online brokers in the country that can help you regardless of your location. Habito does not charge a fee for the mortgage advice services it provides. Habito mortgage advisers search over 90 lenders' mortgage deals and can offer unbiased mortgage advice and guidance tailored to you.


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