Barclays joins run of mortgage rate hikes in blow to borrowers
Barclays has become the latest in a flurry of mortgage lenders to hike their rates amid mounting fears the Bank of England will keep the base interest rates higher for longer following the war in the Middle East.
The blue-chip banking giant has slapped a 0.1 per cent increase on rates on a selection of its productions including residential purchase and remortgage ranges from Tuesday.
David Stirling, financial adviser at Mint Wealth, said: “This cautious shuffle upwards is a gentle reminder that lenders remain twitchy and that, in the modern global economy, geopolitical events can still drive the bills up on a semi in suburban Britain.
“Barclays sadly won’t be the last lender increasing this week. Rising oil prices, inflation worries and global tensions are pushing the cost of money north and other lenders will surely have to follow.”
It follows a number of building societies – including Coventry Building Society, Yorkshire Building Society and Nottingham Building Society – kicking off the week by adjusting its pricing on fixed deals.
Meanwhile, Cumberland Building Society has withdrawn products whilst repricing its mortgages, according to financial information website Moneyfacts.
Mortgage lenders beat the Bank to the rate hike punch
John Wyn Evans, head of market analysis at Rathbones, said: “Fixed mortgage rates are already being repriced higher in response to gilt moves, adding further pressure on consumers.”
The 10-year gilt yield jumped by some 14 basis points as markets opened on Monday before retreating around 4.65 per cent, up 8 basis points. It came as traders ditched their holdings amid fears that UK interest rates would stay elevated for longer – or increase.
The Bank of England has been on a “gradual” rate cutting path, with the base rate currently sitting at 3.75 per cent. However, last week the National Institute of Economic and Social Research warned a “persistent shock to energy prices may force the Bank of England to raise rates back above four per cent”.
As mortgage lenders braced for an elevated path for interest rates, the average two-year fixed homeowner mortgage rate on the market on Monday morning was 4.87 per cent, up from 4.84 per cent on Friday, according to Moneyfacts.
For the average five-year fixed deal, on Monday rates hit 4.98 per cent, rising from 4.96 per cent on Friday.
It follows HSBC UK and Nationwide both announcing they would kick up rates after volatility in energy prices led to analysts betting on a bump in inflation.
This morning, Brent crude – the international bench mark for oil prices – surged past $100, a fresh six-year high which Lindsay James, investment strategist at Quilter, described as an “inflationary tax”.
“It raises costs for businesses, squeezes real incomes and risks keeping headline inflation above target for longer,” James added.
“If that persists, gilt yields and swap rates will remain under upward pressure, which is why we are already seeing mortgage pricing move higher before the Bank has done anything.”