SUB-5% mortgages are expected to disappear as HSBC and Halifax are the latest to hike rates, experts have warned.
HSBC, Halifax and BM Mortgages are set to raise rates across parts of their residential and buy-to-let ranges from tomorrow, following a wider wave of repricing by major banks and building societies.
Renewed conflict in the Middle East and rising oil prices have intensified fears that inflation could remain elevated for longer.
The uncertainty has driven volatility across government bond and swap markets, increasing the wholesale funding costs used to price fixed mortgages.
Brokers warn that further lenders could follow if swap rates continue rising, leaving the cheapest deals increasingly limited to borrowers with large deposits or substantial equity.
Those buying or remortgaging in the coming months are being urged to review their options early, although experts say borrowers should avoid panicking or automatically taking an unsuitable deal.
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said he expects other lenders to follow HSBC and Halifax.
He added: “When HSBC makes sweeping hikes like this, it’s not a tweak, it’s a lender quietly admitting the cheap money has gone. Sub-5% was always a handful of best-buy unicorns and not the norm, and unicorns don’t survive a stampede. I would expect the rest of the high street to follow within days with more of the same turbulence through September.
“Sub-5% will be back eventually, but probably not before well into next year. If you like a listed rate today, stop reading and go lock it in.”
Lock it in
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said it is hard to predict the next few months.
He added: “For fixed-rate deals in particular, we are creeping closer to no sub-5% options; tracker and discounted rates are still priced ‘competitively’, but borrowers need to remember that a few base rate increases may bring you to parity with its fixed-rate cousin.
“Is this a short-term situation to ride out, as we did earlier in the year, or will it remain a serious factor into 2027? It’s hard to predict, so work with what we do know, reserve deals where possible, and stay close to your mortgage broker. Use their knowledge and their advance notice of market changes.”
Craig Fish, Director at London-based Lodestone Mortgages, said the days of sub-5% mortgages are numbered.
He added: “HSBC’s increase from Tuesday marks another lender falling in line with a swap market rattled by Middle East tensions and rising oil prices. It won’t be the last. Almost all others have already repriced in recent weeks, and pressure on funding costs isn’t easing yet. Right now, borrowers with the biggest deposits or the most equity can still find 2- and 5-year fixes around 4.5% to 4.6%, but that window is narrowing by the week.
“Sub-4% has barely existed this year outside a handful of low deposit trackers, so the question isn’t whether sub-4% survives. It’s whether sub-5% does. For those without a big deposit or years of equity behind them, the days of sub-5% mortgages are numbered. Swap rates will decide the next move, and they look spooked. Until they settle, expect rates to keep drifting up, not down.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said there is a “real risk” of sub-5% deals disappearing.
He added: “An awful way to start the week for borrowers, with HSBC putting rates up again. It’s been the trend for weeks now. Sub-4% fixes have already gone. The question now is whether sub-5% goes the same way, and on current pricing that’s a real risk. This is being driven by the bond markets. Gilts and swaps aren’t kind to borrowers, and the Bank of England has yet to meet this week.
“Oil has rocketed after the Saudi pipeline shutdown, which feeds straight into inflation. My view is the MPC holds again on Thursday. But pressure is building and inflation is coming down the tracks fast, so at some point they have to decide whether they keep holding or break. As for when rates come back down, I wouldn’t hold my breath. The Iran war is unresolved, the US midterms are ahead of us, and no Budget until late October. Too much uncertainty for markets to be positive.”
Little surprise
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said sub-5% mortgages are becoming harder to fund.
He added: “HSBC going up again so soon after last week’s repricing is a sign that mortgage pricing has turned a little more unsettled. I wouldn’t say sub-5% fixes are dead, but they could become much harder to find if funding costs keep moving against lenders.
“Borrowers should not panic, but anyone buying or remortgaging soon should get their options reviewed early and secure a suitable rate rather than waiting for the perfect moment. If the market improves again before completion, there may still be an opportunity to switch.”
Thomas Boughton, Founder at London-based Artillium Real Estate Finance, said you shouldn’t assume that rates will keep going up.
He added: “HSBC increasing mortgage rates comes as little surprise to brokers. It is simply a continuation of the trend we’ve seen across the market over recent weeks. There is currently little indication of immediate rate reductions. Uncertainty remains high, confidence is low and lenders are having to react to changing market conditions. However, there is an important point being missed. Banks need to lend. They aren’t increasing rates because they want to.
“They need to remain competitive and continue writing new business and we have already seen lenders become increasingly agile when market conditions allow them to reduce rates. So while the current direction of travel is frustrating, I wouldn’t assume it will last forever. When confidence returns and volatility settles, we could see lenders move in the opposite direction just as quickly.”
