Mortgage rates rise as lenders brace for possible BoE hike
Barclays, TSB and others nudged up fixed‑rate mortgages as swap markets react to Middle‑East tensions and oil price spikes.
Bank of England watchers saw five major lenders increase the price of new mortgage deals on Monday, a move that reflects growing anxiety that the central bank may raise its policy rate later this year.
Rate moves across the sector
Barclays lifted its two‑year fixed rate to 5.53 % and its five‑year fixed to 5.48 %, roughly a 0.2‑percentage‑point rise. TSB, now owned by Santander after a £2.7bn acquisition, added 0.15 % to a suite of residential products. Skipton Building Society and Nottingham Building Society also announced modest hikes, pushing the average five‑year fixed rate to 5.68 %, the highest level since 11 May, according to Moneyfacts.
Underlying market forces
The adjustments stem from a recent surge in swap rates, the benchmark that underpins most fixed‑rate mortgages. Swaps have been pushed higher by the ongoing conflict in the Middle East, prompting investors to revise inflation expectations. At the same time, Brent crude edged toward $100 a barrel, a classic inflationary signal, and gilt yields have risen, with the two‑year government bond hovering around 4.5 %.
"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," said Rachel Springall, finance expert at Moneyfacts.
Looking ahead
While the Bank of England kept its Bank Rate at 3.75 % last week, the Monetary Policy Committee signalled caution. The next meeting on 17 September could bring the first hike since August, with some city analysts forecasting a rise as early as November. Huw Pill, the Bank’s chief economist, has urged colleagues to act "clearly, promptly and decisively" rather than adopt a "wait‑and‑see" stance.
Homebuyers and existing mortgage holders should expect further rate revisions in the coming days, and borrowers may face higher monthly repayments if they lock in new deals. For a broader view of how monetary policy could shape the UK economy, see our analysis of the UK economic outlook.
