Two major mortgage lenders in the UK have announced plans to raise mortgage rates, signaling the impact of the recent conflict in the Middle East on borrowers. HSBC will implement the rate hike for fixed-rate home loans starting today, and Coventry Building Society will follow suit from Monday.
While specific details are yet to be confirmed, experts anticipate that other lenders will also increase their rates, affecting individuals seeking new home loans or looking to remortgage. This move comes as lenders react to the threat of rising inflation due to the conflict between the US, Israel, and Iran.
The cost of fixed-rate mortgages is influenced by swap rates, which are the rates that lenders pay institutions for fixed funding. Following the recent conflict escalation, these swap rates have surged, prompting lenders to adjust their rates accordingly. Additionally, the Bank of England is likely to postpone an anticipated interest rate cut.
David Hollingworth, associate director at broker L&C Mortgages, explained that heightened inflation expectations have led to increased mortgage costs. He highlighted that as lenders adjust their rates, it often triggers a chain reaction in the industry.
Industry analysts at Moneyfacts reported a rise in the average two-year fixed residential mortgage rate to 4.83% and the average five-year fix to 4.95%. Adam French, head of consumer finance at Moneyfacts, attributed the rate increases to the surge in swap rates amid the Middle East tensions.
The fluctuating market conditions underscore the interconnectedness of global events, swap rates, and mortgage pricing, demonstrating the impact of geopolitical events on borrowers’ financial options.