UK Mortgage Rates: After worse-than-expected economic data in the UK, lenders are raising mortgage rates.
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Some mortgage deals are being increased by Barclays, HSBC, NatWest, Accord, and Leeds Building Society starting today.
Inflation and wage growth came in higher than expected.
Although inflation slowed to 3.2% in the year ending March, it was expected to fall further. Meanwhile, wage growth of 6% means earnings are continuing to rise at an inflation-busting pace.
There are concerns that the Bank of England won’t be able to cut interest rates as fast or as far as originally expected.
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What’s Happening to UK Mortgage Rates?
According to Moneyfacts, the average two-year fixed rate is 5.83%, while a five-year deal costs 5.4%. Both averages have risen recently.
In anticipation of the Bank of England cutting its base rate early in the New Year amid slowing inflation, mortgage lenders started cutting rates at the end of 2023. Despite data that suggested inflation was proving too sticky, the Bank decided to freeze its rate in the face of these short-lived reductions.
Financial markets are now anticipating a cut in interest rates this summer, possibly as late as August, with some even pricing a cut for November. Due to concerns about affordability, house prices have remained sluggish in the housing market as a result of the uncertainty.
Furthermore, this uncertainty is reflected in the fact that borrowers are rushing to snap up lower rates as the best mortgage deals don’t last long. Moneyfacts reports that the shelf-life of mortgage products has plummeted to 15 days as of March 2024, a six-month low.
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It means borrowers who are still on cheap fixed-rate mortgages could get a big shock when they remortgage even though rates have dropped noticeably from last year’s highs.
Nearly 1.4 million mortgage deals are set to expire in 2024, forcing homeowners to pay £200 more in monthly payments on average.
On Tuesday, Barclays, NatWest, and HSBC increased rates, followed by smaller lenders.
Trinity Financial reports that some of the residential rates at Accord, a broker-only arm of Yorkshire Building Society, increased by up to 0.4 percentage points.
Rates on some HSBC fixed rate deals increased by up to 0.24 percentage points, while NatWest customers applying for deals on Tuesday will pay up to 0.2 percentage points more.
In addition, Barclays has increased the rate on its five-year fixed deal from 4.93 percent to 5.03 percent, available to those with a 15 percent deposit and a fee of £99. A typical £250,000 repayment mortgage over 25 years will cost £253 per month.
For new and existing customers, Leeds Building Society is increasing fixed mortgage rates by up to 0.2%.
Rates on some Co-op fixed deals went up by up to 0.41% yesterday, while others were cut by 0.07%.
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When will mortgage rates go down?
There is little hope of any mortgage rate cuts until there is greater certainty about Bank of England base rate cuts, experts have warned.
In the meantime, mortgage holders coming to the end of their fixed deals this year and in early 2025 should expect higher rates.
Even if rates do start to come down soon, the lows of the late 2010s are unlikely to be replicated, but a fall in rates would still make a difference to remortgagers and buyers.
While the economic outlook is still difficult for many people, some lenders are offering more innovative products, which could aid first-time buyers. However, borrowers need to watch out for extra mortgage costs.
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