Major UK Lenders Increase Selected Fixed Mortgage Rates

Borrowing costs for some homebuyers and homeowners are rising again after several major UK lenders increased rates on selected fixed-rate mortgage products.

Lenders including Barclays, NatWest, Nationwide, Coventry Building Society and Virgin Money raised rates on a range of fixed-rate mortgage deals. Some products increased by as much as 0.35 percentage points, reversing several weeks of gradually falling mortgage pricing.

The changes followed a rise in swap rates, which are an important influence on the price of fixed-rate mortgages. Swap rates moved higher as geopolitical tensions in the Middle East unsettled financial markets, leading lenders to adjust some of their products as wholesale funding costs increased.

For people buying a home or approaching the end of a fixed-rate mortgage, the repricing could mean higher monthly repayments than were available only days earlier. Even a relatively small increase in the interest rate can add a noticeable amount to the cost of a mortgage over time.

For some borrowers, an equivalent fixed-rate mortgage may now be more expensive than it was earlier in the week, although the impact will vary depending on the lender, deposit size, mortgage term and product available.

Many people assume fixed mortgage rates move only when the Bank of England’s base rate changes. In practice, lenders also take account of wholesale funding costs reflected in swap rates. This means fixed mortgage rates can rise or fall even when the Bank of England leaves its base rate unchanged.

Mortgage rates can continue to change as lenders respond to movements in wholesale funding costs, financial markets and competition across the mortgage market. The latest increases have reversed some of the recent falls, but pricing can still move quickly in either direction.

The changes are a reminder that mortgage deals can be repriced at short notice. Understanding the role of swap rates helps explain why fixed mortgage costs do not always move in line with Bank of England decisions.