BARCLAYS has increased its mortgage rates by up to 0.37% as oil prices rise again with brokers urging borrowers to not panic.
From tomorrow, Thursday 16 July, Barclays is raising rates on a selection of products across its residential and reward range.
The biggest increase is on its Existing Mortgage Customer (EMC) Reward five-year fixed (£999 fee), 85% Loan to Value (LTV) raising by 0.37% from 4.90% to 5.27%.
Alongside this, Barclays has also increased a range of standard residential products, including its 95% LTV five-year fixed from 5.05% to 5.10%, its 90% LTV five-year fix from 4.79% to 4.84%, and its 95% LTV two-year fix from 5.11% to 5.16%, while several remortgage products have risen by 0.07%.
This comes as oil prices, gilt yields and swap rates, which are used to price fixed rate mortgages, have risen on the back of growing tensions in the Middle East.
At the time of writing, Brent Crude Oil is at $85-a-barrel. This is up from a low of $71 just two weeks ago, but below the high of $114 in early May.
Prices have risen in response to Iran and US returning to all-out war in the region. US President Donald Trump has threatened to strike Iran’s bridges and power plants next week if the country does not return to talks.
Don’t panic
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said borrowers may want to consider securing a rate now before they potentially rise further.
She added: “Rate rises like this can understandably make borrowers panic, but every lender reacts differently to market conditions, and while some are increasing rates, others are still competing hard for business.
“If your mortgage deal is due to end within the next six months, don’t wait and hope rates fall again. Speak to a broker, secure a deal now and keep reviewing it. You can often switch to a cheaper product later if rates improve, but you can’t go back in time if they continue to rise.”
Jack Tutton, Director at SJ Mortgages, said the rest of the market will no doubt follow Barclays.
He added: “It comes as no surprise that Barclays are increasing their rates after the financial markets start to react to the escalations in the Middle East. The amount of some of the increases that Barclays are making are significant, it strikes me that they feel that rates could be increasing for a while to come.
“Despite mortgage rates reducing on a consistent basis since the peace deal was struck a month ago, this has all been undone in a matter of days and it will not be long until the rest of the market starts to follow Barclays.”
A warning shot
Craig Fish, Director at Lodestone Mortgages, said lenders are raising rates again.
He added: “Six lenders repricing in two and a half days isn’t a blip, it’s a warning shot. Barclays’ 0.37% hike on its EMC Reward deal is the sharpest of the lot, and it tells you swap rates are moving faster than lenders can quietly absorb. This isn’t lenders getting nervous off their own back.
“It is oil prices and Middle East tension feeding straight into swap rates, and swap rates feeding straight into what you pay. The real question isn’t whether rates are rising, they clearly are. It’s whether this is a sharp correction or the start of a longer climb.
“That depends entirely on whether the ceasefire holds. If you’re anywhere near a renewal and see a rate you can live with, take it. This is not the week to sit on your hands hoping for better.”
Justin Moy, Managing Director at EHF Mortgages, said brokers can help you find the best deal.
He added: “This is the real knock-on effect of the unrest in the Middle East. It lowers confidence in the monetary system, and ultimately, mortgage rates will increase. This move by Barclays is one of a number of announcements in the last 24 to 48 hours from lenders having little choice but to reflect those swap rate increases, and other major lenders will inevitably follow this week.
“As always, we recommend engaging with a broker who can see what is happening with rates ahead of the general public, benefit from their expertise and speed, and continue to proactively check for improvements with your chosen lender. They will more than justify their fee.”
Swap rates have climbed
David Stirling, Independent Financial Adviser at Mint Wealth, pointed out that Leeds Building Society are cutting.
He added: “The ceasefire wobble we warned about is spreading, and the mortgage market has responded with its usual subtlety. Barclays and Coventry Building Society are both raising rates, with Barclays moving selected products by up to 0.37%, as swap rates climb on rising oil prices and renewed Middle East tension.
“When energy markets panic, mortgage pricing follows. It is not personal, it is lenders’ arithmetic, and unfortunately it does not care about your remortgage date. Not everyone is moving the same way. Leeds Building Society are cutting tomorrow, proof that the market is not monolithic and that shopping around has rarely mattered more.
“The spread between the best and worst rates is widening, which makes good advice more valuable, not less. One lender’s bad day is another lender’s opportunity, and right now they are not all having the same day.”
Doug Miller, Director at Lansdown Financial Services, said this is a “warning shot”.
He added: “One lender increasing rates doesn’t make a trend, but it does fire a warning shot. If swap rates remain elevated, more lenders are likely to reprice over the coming weeks. The good news is that competition between banks is still intense, and we’re not expecting mortgage rates to spiral.
“Borrowers who act early will have the best chance of securing today’s deals before any further increases, and if you are due to remortgage with your current product expiring in the next six to seven months then now is the time to act and lock in a new deal.”
Lock in a deal
Peter Dockar, Chief Commercial Officer at Gen H (Generation Home), urged people to lock in a rate now.
He added: “Swap rates have climbed in the last three weeks, which means all lenders are likely to have to price up. Swap rates are rising owing to global political instability and instability right here in the UK.
“We can predict the direction of travel but not how far we’ll go or for how long. It is safe to assume that as long as the US is exchanging strikes with Iran, and as long as the Strait of Hormuz is blocked, rates will likely continue creeping up. When it comes to mortgages, it’s important to remember that the rate you lock in will be the highest rate you could possibly pay. If rates go down before completion, advisers can always request the lower like-for-like rate instead.”
