Coventry Building Society announced yesterday that it will make increases across its full range of fixed rate mortgages on Monday 7 September.
Today it emerged that HSBC will be raising prices on several of its fixed rate products from Monday as well.
It follows renewed tensions in the Middle East this week, which has increased the threat of rising energy prices – something that fuels inflation and could lead to higher interest rates.
But gilt yields also rose this week. This means that borrowing becomes more expensive for the government, which creates instability in markets – and in turn raises the cost of funding for lenders.
The yield on 30-year government bonds rose above 5.9% this week — the highest level since 1998, said Nicholas Mendes, technical director of mortgages at John Charcol.
“Much of the current volatility is jitters ahead of the Chancellor’s Budget on October 28, and bond yields typically remain unstable in the run-up to a major financial event like this,” he said.
“Current market prices suggest interest rates will stay high for longer rather than fall soon, and the direction of travel from here is likely to be up rather than down over the next few months, so borrowers hoping for fixed interest rates to ease in that time should plan for that not to happen,” Mendes added.
What is your advice for borrowers looking for new mortgage deals?
With a couple of mortgage lenders raising interest rates and more willing to follow blanket advice for anyone looking for a deal, it is acting fast.
Mendes advised anyone within six months of the expiration of their current deal to secure a new rate now rather than delay in the hope of ironing out circumstances.
He explained: “Most lenders allow the offer to be frozen for a period of between three and six months, and if a cheaper deal appears before it closes, it is usually possible to move in at no cost, so we will not lose much by acting early, as the real cost of leaving is too late.”
What about first-time buyers? Mendez advised applying the same logic. “Be sure to check affordability early so the budget is clear, and then move on to submitting a full application once you’ve found a property, because that’s the point, the price is actually locked in, usually for six months while you complete the purchase,” he said.
Justin Moy, managing director of Chelmsford-based EHF Mortgages, echoed this advice speaking to Newspage.
He said: “The warning given by most mortgage brokers at the start of the week has come true, with mortgage lenders having no choice but to raise mortgage interest rates as borrowing costs rise. It has become a race to the top; borrowers need to be aware and act quickly to secure deals, especially those looking to remortgage in the coming months, and particularly those with interest rates of 1% to 2% from 2022.”
“There’s not much to suggest there are improvements on the horizon. The October budget should be better for the 2026 bailout, and the government.”
