Banks hike mortgage rates as Bank of England interest rate cut expected to be delayed

Mortgage brokers said that homeowners are set for a summer of ‘discontent’

Five mortgage lenders have increased rates in the latest blow to homeowners, as expectations of when the Bank of England will reduce interest rates are pushed further back.

Barclays, HSBC, NatWest, Accord and Leeds Building Society informed mortgage brokers this week that they were going to be upping rates on some of their mortgage deals.

Rates have fluctuated recently as views have changed on when the Bank of England will cut interest rates after UK inflation slowed less than expected in March.

Figures released by the ONS last Wednesday morning showed that inflation was 3.2 per cent in March, slightly higher than the 3.1 per cent predicted by economists.

At the start of the year money markets predicted as many as five or six cuts to interest rates, but now are anticipating as few as two, with some economists expecting the first cut to take place in June.

Swap rates, which lenders use to price mortgages, are based on what the markets think interest rates will be in the future. The uncertainty over when the BoE plans to cut the base rate has meant swap rates have risen.

Mortgage brokers said that homeowners are set for a summer of “discontent” and recommend homeowners lock in a deal as quickly as possible.

Elliot Culley, director at Switch Mortgage Finance said: “The rate rollercoaster rolls on. Just when the market appears to be picking up some momentum, there is a sharp change of direction. We are now seeing the spike in swap rates last week, filtering through to the public as lenders raise their rates in response.

“The volatility we are experiencing currently really amplifies how important it is to secure a rate as soon as possible, as this could save you hundreds of pounds, especially for existing homeowners.”

Ranald Mitchell, director at Charwin Private Clients, said: “A summer of mortgage discontent is manifesting as major lenders push rates up further. Home buyers are already frustrated with the market conditions and this will continue to stifle activity. With many unhappy with the costs of mortgages, they will express their displeasure with inaction.”

Nicholas Mendes, mortgage technical manager at broker John Charcol said: “This latest move from HSBC leaves Nationwide and NatWest leading from the front on purchase and remortgage deals, which will inevitably mean service levels coming under pressure and eventually similar moves from the remaining lenders.’

The Bank of England upped the base rate on 14 consecutive occasions between December 2021 and August 2023, but has kept it at 5.25 per cent since then. The next decision on interest rates is on 9 May.

According to financial information service Moneyfacts, the average two-year fixed mortgage rate is 5.82 per cent, while the average five-year fixed rate is 5.40 per cent.