Mortgage rate rises loom as major lenders reprice
Major lenders have moved to increase mortgage rates to catch up with recent rises to swap rates, according to Moneyfactscompare.co.uk analysis.
- Over the coming days, more lenders are expected to review mortgage rates in response to higher swap rates, with HSBC and NatWest so far the biggest banks to increase rates since the start of this month.
- Lenders will need to adjust to ensure their rates are not too low. Earlier this year, in late February, the biggest high street banks, which include Barclays, HSBC, Lloyds Bank, NatWest and Santander, priced their lowest rate deals around 0.29% above the two-year swap rate,
- Only a couple of lenders have withdrawn fixed rate mortgages from sale since the start of this month, such as Family Building Society, likely as a temporary measure. This is in stark contrast to the pace of pulls in March 2026 when many lenders rushed in response to soaring swap rates, due to the initiation of conflict in the Middle East.
- A 0.25% rise on a typical two-year fixed rate mortgage would add around £38 to monthly mortgage repayments, or £456 per year, based on a rate of 5.63%, rising to 5.88% – borrowing £250,000 over 25 years.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:
“The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates. Major lenders, which include HSBC and NatWest, have increased rates since the start of September. The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages, with more moves expected in the coming days. Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages. Lenders look at margins very carefully, so it would be unwise to price their deals too low, if the expectations are for interest rates to rise, even if over the short-term.
“Mortgage rates are rising due to the escalating military conflict between the US and Iran, reigniting inflationary fears. The UK 10-year gilt yield has also risen further above 5% to an 18-year high recently due to a global bond sell-off, adding further pressure to the wholesale funding costs that underpin fixed mortgage pricing. However, the hit to the mortgage market over recent days pales in comparison to when the conflict in the Middle East began around six months ago, when many lenders pulled fixed rate deals. While this alone might still not reassure some borrowers, it is worth noting that the pressure on swap rates over the past six months has not been caused by UK fiscal policy, which is why withdrawals and rate hikes are nowhere near the scale experienced in the aftermath of the ‘mini-Budget’ in 2022.
“Borrowers expecting mortgages rates to drop in the coming weeks have had their hopes dashed. The prolonged conflict increases the chances for the Monetary Policy Committee to vote for an increase to the Bank of England Base Rate (BBR). However, this might not happen until November, according to economists. Regardless of any changes to BBR, it is still essential borrowers do not delay seeking advice to navigate the mortgage maze. Those looking to remortgage could do so around six months in advance by securing a product transfer with their existing lender, for peace of mind. Securing a fixed rate deal compared to falling onto a revert rate is still wise, as around £230* could be saved each month in repayments.”
*Average standard variable rate (SVR) is currently 7.13%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,787 per month, versus £1,555 per month on 5.63% two-year fixed rate.
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