A growing number of major lenders are reversing recent rate cuts as geopolitical uncertainty pushes swap rates higher
NatWest has become the latest major lender to announce increases to its fixed mortgage rates, with rises of up to 0.27% taking effect from Friday, adding to a wave of repricing announcements that have swept across the UK mortgage market this week.
The move follows similar increases from Barclays, Nationwide, Coventry Building Society and Virgin Money, as renewed tensions in the Middle East push up swap rates and increase the cost of funding for lenders. The Bank of England's Monetary Policy Committee (MPC) voted 7–2 to hold Bank Rate at 3.75% at its June meeting, with the next decision due on 30 July.
David Hollingworth (pictured top), associate director at L&C Mortgages, said the recent trend of rate reductions had gone into sharp reverse.
"The story for mortgage rates in recent weeks has generally been positive, as cuts to fixed rates have dragged the market in a positive direction," he said. "However, any borrower hoping for rate cuts to become an ongoing trend will need to rethink, as a growing number of lenders have announced impending hikes to fixed deals in the coming days."
What is driving the reversal?
The market shift has been driven by geopolitical instability feeding through into the swap rates that underpin fixed mortgage pricing. This is not the first time the conflict has rattled lender pricing, with earlier rounds of repricing in March leading to Nationwide, Virgin Money and NatWest all moving within days of one another.
"The resumption of hostility in the Middle East has caused further uncertainty in financial markets, as the threat of higher interest rates returns," Hollingworth said. "That's affecting lenders' funding costs and has already resulted in several major lenders announcing that they have increased fixed rates or are about to."
The pace of change has been striking. Multiple major lenders have repriced within days of one another – a pattern Hollingworth said borrowers should read as a warning sign.
"Several moves in quick succession is usually a signal that others will not be far behind," he said.
What does this mean for borrowers?
While some of the increases announced have been modest, others carry a material impact on monthly repayments. Hollingworth pointed to Nationwide's leading two-year fixed purchase rate as a stark example of how quickly costs can shift.
"Although many increases have so far been slight, others are chunkier," he said. "For example, Nationwide's leading two-year fix for purchases at 4.24% has now lifted to 4.59%, an increase of 0.35% equating to an uplift in monthly payments of almost £40 or £480 per annum."
The dynamic is a familiar one. When swap rates surged earlier this year, brokers found borrowers torn between locking in quickly and waiting for calmer conditions – a tension Hollingworth's warning looks set to rekindle.
"Borrowers that had been holding on in the hope of further reductions improving their rate choice may now need to hurry if they want to avoid missing out on some of the lowest rates," he said.
Should borrowers act now?
The case for acting promptly is clear, but Hollingworth was careful to note that locking in a rate does not mean committing irrevocably, and that flexibility remains available to those who move quickly.
The Bank of England's June MPC statement noted that global energy prices remain higher than pre-conflict levels and continue to be volatile, with the 30 July rate decision now one of the most closely watched in recent months. The UK Finance report on what the Middle East conflict means for mortgages offers further context on how prolonged geopolitical disruption feeds through to household borrowing costs.
Hollingworth's advice to those still sitting on the fence is direct. "Things can change quickly but securing a rate now could avoid being hit with further rises while still allowing a further review of rates before completion if the situation eases back again."
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