Two major mortgage lenders in the UK are planning to increase mortgage rates, signaling the impact of the recent Middle East conflict on borrowers. HSBC will implement higher costs for fixed-rate home loans starting today, while Coventry Building Society will follow suit from Monday.
Although the exact details are yet to be finalized, experts anticipate that other lenders will also raise their rates. This development poses a challenge for individuals seeking new home loans or looking to remortgage.
The surge in fixed-rate mortgage costs is a response to the threat of rising inflation due to the US and Israel’s conflict with Iran. The pricing of fixed-rate mortgages is influenced by swap rates, which have spiked following the recent conflict outbreak. Additionally, the Bank of England is likely to delay an anticipated interest rate cut later this month.
David Hollingworth, associate director at broker L&C Mortgages, explained that the Middle East conflict has heightened inflation expectations, leading to delays in rate cuts. This situation increases costs for lenders in setting fixed-rate mortgages, potentially leading to higher rates across the board.
Amid the current uncertainty, borrowers considering fixed-rate deals are advised to secure rates promptly. Industry experts at Moneyfacts reported that the average two-year fixed residential mortgage rate has risen to 4.83%, with the average five-year fix increasing to 4.95%.
Adam French, head of consumer finance at Moneyfacts, highlighted the sharp rise in swap rates due to the escalating conflict with Iran, which has impacted oil and gas prices and reignited inflation worries. The mortgage market has seen an immediate effect, with some lenders pausing or reconsidering rate reductions.
The interconnectedness of global geopolitical events, market movements, and swap rates underscores the complexity of mortgage pricing. As troubling events unfold worldwide, borrowers must remain vigilant in navigating the evolving landscape of mortgage costs.
