BROKERS have warned borrowers that the mortgage rate war that raged in January has officially now come to an end, as Nationwide today hiked selected fixed rates by up to 0.19% and Virgin by up to 0.14%. One broker described it as a “kick in the teeth” for borrowers, while another said “it’s now pretty clear that the road to lower rates may be longer and less predictable than expected”.
Earlier today, the Nationwide revealed that average property prices rose by 0.3% last month, with annual house inflation edging up to 1% in January.
Commenting on the hikes, Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said: “After a good rally throughout January, the rise in Swaps, which fixed rate mortgages are priced off, has inevitably meant that lenders have had little option but to increase rates, this time by up to 0.19% on selected deals.
“There are still some very good deals to take advantage of, but time is now of the essence for existing borrowers to get their paperwork in and secure the cheapest deals.”
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said inflation rising is the cause of the hikes: “With these increases from the Nationwide, it’s now pretty clear that the road to lower rates may be longer and less predictable than expected, as inflation has dug in its heels. Borrowers need to take note when a lender as large as the Nationwide increases rates by up to 0.19%.”
An end to the price war
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, added: “Nationwide and Virgin Money hiking rates signals an end to January’s price war. The primary culprit is rising SONIA Swap rates, which is the price lenders pay for wholesale funding.
“When swap rates rise, funding fixed mortgages becomes more expensive. Lenders must rapidly pull and reprice products to protect their profit margins and prevent service overload. This isn’t a crash, but a correction: the market is realising the path to lower rates will be slower and bumpier than hoped.”
Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, described the rate increases as “a kick in the teeth for borrowers that have been full of optimism lately” but hopes this is a blip rather than the beginning of a more material repricing in rates.
He continued: “We’ve seen swap rates edge up a little and now this is starting to impact the rates available to borrowers. But hopefully there will be more positive news in the coming weeks and months if inflation falls back into line and the Bank of England cuts rates further.”
Shot across the bows
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, warned borrowers to take note of the rate increases: “What these rate increases highlight is that the direction of mortgage pricing can change very quickly. With inflation edging up and the prospects of a rate cut by the Bank of England diminished, this is being priced into wholesale borrowing costs, and the result is higher rates for borrowers.
“This should serve as a shot across the bows to borrowers that rates can go up as quickly as they come down.”
Jack Tutton, Director at Fareham-based SJ Mortgages, said all eyes will be on the minutes that are published alongside this week’s interest rate decision: “It is no surprise that yet more lenders have moved to increase their rates following a sustained increase in the cost of borrowing for lenders. Swap rates are now higher than they were a month ago, which is why we are seeing these increases.
“Whilst a cut in the base rate this week is unlikely, the split in the vote will be important to the financial markets and how they react to it.”
Hopefully just a blip
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, added: “With inflation higher than predicted, it was inevitable that lenders would put the brakes on and increase rates as SWAP rates rose.
“The hope is that this is just a blip and rates will continue trading downwards, but if inflation remains stubborn we may see further increases.”
