Two major UK mortgage lenders are preparing to raise mortgage rates, signaling the impact of the Middle East conflict on borrowers. HSBC will implement rate hikes on fixed-rate home loans starting today, while Coventry Building Society will follow suit from Monday.
Although specific details have not been confirmed yet, experts predict that other lenders will likely increase rates as well. 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 heightened inflation concerns triggered by the conflict between the US, Israel, and Iran. This increase is tied to swap rates, which reflect the fees lenders pay for fixed funding from institutions.
Following the recent conflict escalation, swap rates have surged, and the expected Bank of England interest rate cut may be postponed. David Hollingworth, associate director at broker L&C Mortgages, explained that the market anticipation of higher inflationary pressure has led to lenders adjusting rates, with a ripple effect likely to follow.
Industry experts from Moneyfacts reported a rise in the average two-year fixed residential mortgage rate to 4.83% and the average five-year fixed rate to 4.95%. Adam French, head of consumer finance at Moneyfacts, highlighted that the spike in swap rates is driven by the Middle East conflict’s impact on oil and gas prices, reigniting inflation worries.
The sudden market shift has already prompted some lenders to reconsider planned rate cuts. This market volatility serves as a reminder that mortgage costs are influenced by global geopolitical events, impacting swap rates and, consequently, the deals available to borrowers.