Three Major Lenders Set to Increase Mortgage Rates

Learn about the latest developments as three major lenders, Nationwide, Santander, and NatWest, increase fixed mortgage rates. Gain insights from experts on navigating this evolving market.

Three prominent lenders, including Nationwide, Santander, and NatWest, have announced plans to raise rates on new fixed deal mortgages starting Tuesday. This decision comes amidst lingering uncertainty surrounding lending costs, with similar moves observed among competitors last week.

Anticipations regarding the Bank of England’s interest rate adjustments have been revised, prompting these adjustments in the market.

The interest rates on fixed mortgages typically remain unchanged until the deal matures, usually after two or five years, prompting individuals to select a new deal to replace it. Sticking with the current deal could result in higher costs due to variable rates.

Approximately 1.6 million existing borrowers with relatively low fixed-rate deals expiring this year are faced with decisions on their mortgage options.

While some may have anticipated a consistent decline in rates this year, following previous fluctuations, the market has shown stabilization and recent trends indicate a slight increase in rates.

For instance, Nationwide, the UK’s largest building society, is set to implement rate increases of up to 0.25 percentage points on Tuesday.

According to financial information service Moneyfacts, the average rate on a two-year fixed deal currently stands at 5.87%, still approximately one percentage point lower than last year’s peak.

Mortgage brokers suggest that recent rate adjustments do not signify a return to the rapid increases seen in previous years. However, the unexpected rise in rates may impact decisions on home purchases.

David Hollingworth from L&C Mortgages remarks, “This is not one-way traffic and could change again soon.”

Aaron Strutt of Trinity Financial notes, “Many people expected fixed rates to decrease rather than increase, and these higher rates may deter potential homebuyers.”

Further rate adjustments from other banks and building societies are anticipated in the coming week.

The Bank of England is scheduled to make its next decision on benchmark interest rates on May 9, with expectations of fewer and less frequent rate cuts than previously anticipated.

Suggestions to enhance mortgage affordability include making overpayments, considering an interest-only mortgage, or extending the mortgage term beyond the typical 25 years.