Several of Britain’s largest lenders increased fixed-rate mortgage rates on Friday, responding to growing concerns about energy prices and inflation in the wake of escalating conflict in the Middle East. NatWest, the Co-operative Bank, and Skipton Building Society followed earlier moves this week by HSBC, Nationwide, Santander, and Coventry Building Society in raising the cost of borrowing.
NatWest announced rate increases across a range of its products, effective Saturday. According to the bank, a customer remortgaging with a 60 percent loan-to-value ratio on a two-year fixed-rate mortgage will see rates rise from 4.01 percent to 4.13 percent, with no arrangement fee. HSBC confirmed Friday that rates on some of its fixed-rate deals would increase by 0.25 percentage points, while Skipton would raise rates on its two-year fixed deals by 0.16 percentage points.
The increases come as swap rates, which lenders use to price fixed-rate mortgage deals, have risen sharply this week. Two-year swap rates reached 3.65 percent on Friday morning, up from 3.33 percent a week prior, according to Moneyfacts. Adrian Anderson, managing director of broker Anderson Harris, described a “complete change” in market sentiment. “For quite some time, people have been rather nonchalant, thinking they’d get a cheaper deal if they waited as base rates were expected to fall,” he said. He noted a shift in client behavior, with more borrowers opting to lock in longer-term fixed rates.
“Another client who had been undecided whether to fix for two or five years called up and decided on five. He said he wanted to lock it away for longer given all the uncertainty,” Anderson added. Aaron Strutt, product director at broker Trinity Financial, predicted further rate increases next week, stating, “It seems almost certain we are going to see a lot more rate changes over the coming days.” Brokers are advising borrowers to act quickly, as lenders typically allow borrowers to lock in new rates three to six months before their current deals expire. “Delaying a decision to select a new deal could be costly, especially if you have a larger mortgage loan,” Strutt cautioned.
The rate adjustments occurred as Halifax released its latest house price index, showing a 0.3 percent increase in prices in February compared to the previous month, continuing a recent trend of gradual price rises. However, analysts cautioned that this trend may not continue. Ashley Webb, a UK economist at consultancy Capital Economics, warned that if the conflict in the Middle East is not resolved quickly, fewer interest rate cuts and/or softer buyer sentiment could temper the strengthening housing market.
Some estate agents reported early signs of a slowdown. Jeremy Leaf, an agent in north London, said, “There is no question some buyers and sellers have been pressing the pause button since war in the Middle East began. We expect that button will be pushed a little harder if it seems likely uncertainties over interest rates and inflation persist for much more than a few weeks.”
HSBC Bank Middle East, fully owned by HSBC, is the largest international bank in the Middle East, with origins dating back to 1889. The bank has successively been headquartered in Tehran, London, Jersey, and currently Dubai since 2016. HSBC UAE offers a full range of services to personal and business banking customers, and has grown from a single branch in Dubai to become HSBC Group’s biggest business in the Middle East.
