Mortgage brokers were shocked as Halifax became the fourth major mortgage lender to up interest rates today, despite relative calm in the financial markets that tend to set home loan prices.
The country’s biggest mortgage lender joined fellow “big six” members NatWest and Santander, as well as the Co-Operative Bank, in increasing rates. The wave of increases that shocked brokers, who say that the changes go in the opposite direction to recent movements in the market for interest rate swaps, the financial instruments usually used to price mortgages.
Speaking to news agency Newspage, Darryl Dhoffer, adviser at The Mortgage Expert, said: “Are we missing something here? Swap rates are reducing yet lenders are increasing mortgage rates. There's no logic to mortgage pricing right now.”
Official data this week will paint a clearer picture of where interest rates might go, with an expected knock-on effect for swap rates and mortgage prices. Unemployment and wage growth statistics tomorrow, followed by GDP data on Wednesday, are expected to show the UK economy on its way back out of recession. Stronger-than-expected figures might encourage the Bank of England to keep its base rate at the current level of 5.25%, while weaker figures could mean a cut enters the horizon sooner.
Rohit Kohli, director at The Mortgage Stop, said: “It's looking like lenders are thinking any cut in the base rate now won't happen until later this year, which will worry the thousands of people who were hoping the Bank of England would take some form of action in the coming weeks as their fixed rates come to an end.”
Halifax’s increase will come into effect from Wednesday, with fixed rates for first time buyers, large loan, new build and affordable housing mortgages increasing by as much as 0.2 percentage points.
Justin Moy, managing director at EHF Mortgages, noted that the rises came just ahead of the busy spring season for the property market.
He said: “More disappointment in the mortgage market, with the UK's largest lender also now increasing rates this week following others earlier in the day.
“This is a bitter blow to borrowers, especially when we are rapidly moving towards the most important time of the year for buying and selling property. Rates need to fall, and fall quickly, to rescue both the economy and property market.”
The rises from NatWest and Santander were small, with Santander reducing the interest rate on some products at the same time as it upped them for others. However, brokers noted that they were mostly aimed at existing customers agreeing to new fixes, who may struggle to get a competitive rate elsewhere because of tighter affordability criteria.
The Co-Operative Bank, meanwhile, had the biggest jump in rates today, with some products being upped by as much as 1.09 percentage points.
According to Moneyfacts, the average two-year fixed residential mortgage rate today is 5.78%. The average five-year fix is 5.35%.
