SANTANDER is the latest high street lender to reprice upwards as US strikes on Iran continue and tensions in the Middle East mount, with mortgage rates rising by up to 0.3%.
Brokers said the rises, which follow moves by other major lenders including Barclays and HSBC yesterday, show “how quickly the Middle East conflict can impact the monthly mortgage payments of UK homeowners”.
From tomorrow, Santander is increasing fixed rates across its new business range by up to 0.3%.
It’s also expanding its range with new 10-year fixed rates for first-time buyers (FTBs) and home movers across multiple LTV bands, including new build.
In addition, the lender is launching new 2- and 5-year fixed rates with a £1,499 fee for new build clients.
In its product transfer range, the lender is increasing most residential and BTL fixed rates, but there are no changes to the tracker rates in its new business or product transfer ranges.
Matt Coulson, Founder at Rickmansworth-based Heron Financial, said: “Five major lenders have repriced inside 24 hours, which shows how quickly the Middle East conflict can impact the monthly mortgage payments of UK homeowners. But to be fair to Santander, they’re giving at least 24 hours’ notice.”
Coulson added that interest in longer term fixes, the norm in the US and much of Europe, tends to rise “every time we get a shock like this”.
He continued: “UK uptake has been low every time they’ve been offered. What I’d want to know is whether shocks arriving this frequently start to change that.
“My instinct is that British borrowers have always treated a fix as a short-term hedge rather than a view on the next decade, and that habit is what would have to shift.”
Manooch Suree, Director at Uxbridge-based Zinga Financial Services, said rising swap rates, which are used to price fixed rate mortgages, are the reason for the rate rises: “These latest increases reflect the wider pressures we’re seeing in financial markets, with geopolitical tensions and rising oil prices feeding into higher swap rates.”
Stephen Perkins, Managing Director at Yellow Brick Mortgages, urged anyone waiting to lock into a mortgage to do so now.
He added: “For borrowers, it’s a reminder that mortgage pricing can change quickly. Waiting in the hope of securing a slightly lower rate can sometimes have the opposite effect if market conditions move against you.”
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said the price of oil is to blame for higher rates.
She added: “Amid escalating tensions in the Middle East, the price of oil is on the rise again and that risks feeding inflation, which could see interest rates rise or at least stay higher for longer.
“Markets and lenders are increasingly nervous about inflation and that is now starting to really hit borrowers here in the UK.”
When it comes to locking in for 10 years, Jones added: “It’s important that borrowers understand the trade-off. 10-year fixed rate mortgages often come with significant early repayment charges, so they may not be suitable if there’s a chance you’ll move home, remortgage or repay a large part of the loan during that period.
“Before committing, borrowers should consider not only where rates are today, but also their own plans for the next decade.
“Certainty has value, but so does flexibility, and making sure the mortgage fits your future is just as important as finding the lowest rate.”
Jamie Elvin, Director at London-based Strive Mortgages, said “lenders price mortgages based on the cost of funding, and recent rises in swap rates, driven by global uncertainty and higher government borrowing costs, have pushed funding costs up. As a result, we’ve seen several major lenders reprice in quick succession”.
He added: “It doesn’t necessarily signal that the Bank of England will raise rates again, but it does show markets expect borrowing costs to remain higher than many had hoped.
“For borrowers, if you have a purchase or remortgage coming up in the next few months, securing a rate sooner rather than later can provide protection while still allowing you to switch to a lower deal if rates improve before completion.
“The new 10-year fixed rates are unusual for the UK but make sense for borrowers who prioritise payment certainty over flexibility. For most people, a well-priced 2- or 5-year fix will still be the more appropriate choice, but the right answer depends on individual circumstances rather than trying to predict the market.”
Michelle Lawson, Director at Fareham-based Lawson Financial, expects more lenders to raise their rates in the days ahead: “Turmoil at home and abroad is starting to bite with borrowers bearing the brunt once again.”
It’s a view echoed by David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth: “Santander joins what is now a full set, with five major lenders raising rates in the space of a day. This tells you everything about where the market is heading, at least for now.”
