TSB has announced further “dramatic” increases of 0.5% in its mortgage rates after revealing hikes just 24 hours ago in an “unprecedented” move amid the uncertainty of the Iran war.
On Monday, the lender said it was increasing rates by up to 0.15% on its fixed-rate residential and buy to let mortgages.
Now, 24 hours later, it has announced further hikes of 0.5% in mortgage rates across the board.
These are significant increases from one of the key high street mortgage lenders, in response to the spiralling swap rates and the Middle East conflict with the US and Israel striking Iran.
Rising oil prices mean the cost of petrol at the pump is now on average 135.67p a litre, up from 132.14p last week. It is at its highest level since December last year.
That will lead to inflation going up and swap rates rising – the Bank of England is now expected to hold, or even increase, its base rate.
This will mean higher mortgage costs and higher interest rates for savers.
Experts warn that in this environment borrowers need to lock in deals because the “rates you see this morning may not exist this afternoon”.
Rates you see this morning may not exist this afternoon
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said this was akin to TSB saying it didn’t want business this week.
He added: “This second increase this week has all the hallmarks of a lender that doesn’t want any business for the next few days, as markets settle after a turbulent few days. Most high street lenders have, in the main, had relatively small increases compared to the huge fluctuations in swap rates, with those smaller lenders that rely extensively on swap funding pulling out of the market completely, waiting for the dust to settle.
“With swap rates falling today, there will be a breeze of optimism that we will return to normal soon, but for the moment, funding will continue to be troubled on pricing, and lenders will pause or limit their new business.”
Ken James, Director at London-based Contractor Mortgage Services, urged borrowers to lock in mortgage deals quickly.
He added: “TSB’s rate button may now be permanently stuck on ‘increase’ and other lenders are sure to follow in what can only be described as worrying times. Mortgage brokers across social media and other platforms are sending out a clear message that deals can disappear fast with lenders repricing at record speed, the safest strategy may be to secure a rate while it still exists.
“If you’re sitting on the fence about locking in a mortgage deal, you need to get your skates on because at the current pace, by the time you finish reading this post, the rate may already have gone up again.”
TSB are certainly keeping brokers on their toes
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, said brokers are desperately refreshing their inboxes.
He added: “TSB are certainly keeping brokers on their toes and while other lenders seem to be reviewing their pricing regularly, TSB are taking a much more dynamic approach with hefty increases and daily updates.
“While swap rates and global tensions will be the official explanation, announcing increases in this way seems like panic from the lender. At TSB’s current pace of rate changes, brokers may spend less time analysing the mortgage market and more time refreshing their inbox.”
Simon Bridgland, Broker at Canterbury-based Charwin Private Clients, said the situation was volatile.
He added: “In reality in such a rapidly changing environment, it’s no surprise lenders are struggling to keep up and plan ahead. This leaves borrowers in the unenviable position of not having a hope in hell of securing the headline rates they see.
“When the wind changes direction again on rates, will borrowers be left huddling for shelter on higher rates or will lenders give them a decent opportunity to reverse the rapid increases? You can bet your bottom dollar that those dealing directly with a lender won’t be told about reductions in time for the borrower to action and get a better deal before their loans complete.”
Two rate hikes in 24 hours is pretty dramatic
Harry Goodliffe, Director at HTG Mortgages, said other lenders could make similar moves.
He added: “Two rate hikes in 24 hours is pretty dramatic, even by today’s standards. The volatility we’re seeing in global markets, including the Middle East tensions, is clearly feeding into pricing.
“I suspect we may see a few more lenders make similar moves if swap rates remain elevated, alongside some lenders already removing five-year products.”
Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, said deals need to be secured before they disappear.
He added: “When TSB doubles up on rate hikes inside 24 hours, it is not a pricing strategy, it is a stop sign. Lenders do not increase twice in a day because they want your business, they do it because swap rate volatility has made pricing tomorrow genuinely impossible today.
“With swap rates now falling, there is reason to think the worst of this repricing sprint is nearly over. But borrowers sitting on the fence should not wait for confirmation. Rates you see this morning may not exist this afternoon, and anyone dealing direct with a lender will be the last to hear about reductions when they arrive.”
It’s an unprecedented to move by TSB
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, said the move is “unprecedented”.
He added: “Mortgage lenders are increasing rates across the board as swap rates have spiked over the last week. This has led to mortgage lenders fighting to stay uncompetitive as opposed to the normal objective to be the most competitive.
“It’s an unprecedented move by TSB to increase rates twice in one week, but as other mortgage lenders also react, sometimes lenders have to reassess, which is what TSB have done.”
Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said the jump is quite brutal.
He added: “I am not surprised TSB is increasing its rates but a jump of 0.5% indicates they want to stop receiving business. Moves like this often signal lenders pressing pause on new volumes while markets settle after a volatile few days.
“Lenders will likely remain defensive in the short term, adjusting pricing and controlling application volumes until funding costs become clearer again.”
