Two major mortgage lenders in the UK are preparing to raise mortgage rates, signaling the impact of the recent Middle East conflict on borrowers. HSBC will implement an increase in fixed rate home loan costs starting today, and Coventry Building Society will follow suit from Monday. While specific details are yet to be confirmed, experts anticipate that other lenders will also raise rates, affecting individuals seeking new home loans or looking to remortgage.
The surge in fixed rate mortgage costs is a response to heightened inflation concerns triggered by the conflict between the US, Israel, and Iran. The pricing of fixed-rate mortgages is influenced by swap rates, which have spiked due to the recent conflict. Additionally, the Bank of England is expected to postpone an anticipated interest rate cut later this month.
David Hollingworth, associate director at broker L&C Mortgages, stated that the Middle East conflict has led to expectations of increased inflationary pressures, impacting rate cuts. This situation results in higher costs for lenders when setting fixed-rate mortgage prices, potentially leading to rate hikes across the industry. The uncertainty in the market suggests that these upward pressures may persist, urging borrowers to secure fixed-rate deals 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 conflict, affecting oil and gas prices and reigniting inflation concerns. The mortgage market is experiencing immediate effects, with some lenders pausing or reconsidering planned rate reductions.
The linked movement between swap rates and fixed mortgage pricing underscores the impact of global events on mortgage costs. As geopolitical events influence markets and swap rates, borrowers are advised to stay vigilant amid the evolving economic landscape.