Two major mortgage lenders in the UK are planning to increase mortgage rates due to the impact of recent events in the Middle East conflict. HSBC is raising the cost of fixed rate home loans starting today, and Coventry Building Society will follow suit from Monday.
While the exact details of the rate hikes are not yet confirmed, experts predict that other lenders will likely follow this trend, affecting individuals seeking new home loans or looking to remortgage.
This move by lenders is a response to the potential rise in inflation triggered by the conflict between the US, Israel, and Iran. Fixed rate mortgages are influenced by swap rates, which are the costs lenders incur for fixed funding from institutions.
Following the recent conflict escalation, swap rates have surged, prompting lenders to adjust their rates. Additionally, the Bank of England is anticipated to delay an expected interest rate cut, adding further pressure on mortgage costs.
David Hollingworth, associate director at broker L&C Mortgages, highlighted that the uncertainty in the market is likely to persist, leading to a gradual increase in mortgage rates. Borrowers considering fixed-rate deals are advised to secure rates promptly.
Moneyfacts reported that the average two-year fixed residential mortgage rate has climbed to 4.83%, while the average five-year fix has reached 4.95%. Adam French, head of consumer finance at Moneyfacts, emphasized that the rise in swap rates due to geopolitical tensions is impacting mortgage pricing and could halt the recent trend towards lower rates.
The current situation underscores the global influences on mortgage costs, emphasizing the interconnectedness of geopolitical events, market movements, and borrower deals. The market is closely monitoring these developments amidst ongoing uncertainties.