Multiple major UK banks have raised their mortgage rates this week, a move attributed to ongoing concerns about inflation and the future direction of interest rates. NatWest, Santander, HSBC, Lloyds Bank, and TSB all implemented rate increases within hours of each other, marking a significant day for the mortgage market.
Santander has announced particularly substantial hikes, increasing two-year fixed rates by up to 0.45 percentage points and five-year fixes by up to 0.4 percentage points. This change means Santander is reportedly removing its remaining sub-5% rates; the bank had previously offered a two-year fix at 4.52%.
Barclays also increased its rates, with its leading 4.55% two-year fix rising to 4.75%. This follows a recent adjustment by the bank. HSBC's lowest two-year fix is now 4.79%, and its cheapest five-year fix is 4.75%.
Aaron Strutt, of mortgage broker Trinity Financial, noted the unusual synchronicity of the rate hikes, stating he couldn't recall a time when five major lenders increased their rates on the same day. He added that some of Barclays' deals have now exceeded 5%, a development hoped to be avoided despite economic pressures.
Building societies have also participated in repricing, with Nationwide increasing selected fixed rates by up to 0.3 percentage points. These adjustments are occurring ahead of the Bank of England's next interest rate decision on Thursday.
Experts forecast a potential for five base rate rises between now and the end of next year, driven by concerns over inflation. The average two-year fixed mortgage rate has already climbed by 0.89 percentage points since March 2026, according to Moneyfacts. For a £250,000 mortgage repaid over 25 years, this equates to an approximate increase of £131 per month, or £1,572 annually.
The Bank of England estimates that 750,000 households with fixed rates below 3% are due to have their deals expire in 2026. Many of these borrowers, who may have previously secured rates between 1% and 2%, could face fixing at rates around 5%. A £250,000 mortgage at 5% over 25 years could cost £1,462 per month, a significant increase from the £1,000 per month expected at a 1.5% rate.
Recent spikes in Sonia swap rates, which reflect market expectations for future interest rates, are contributing to the upward pressure on mortgage pricing. Five-year swaps have reached 4.78%, up from 4.28% a month ago, while two-year swaps are at 4.7%, up from 4.17%. This rise is partly attributed to market concerns over the impact of increasing oil prices on inflation.
Rachel Springall, finance expert at Moneyfacts, indicated that it is 'highly likely' other lenders will follow suit and adjust their rates. She noted that borrowers not yet needing to refinance, particularly those with five-year fixes due to mature in 2027, will likely face continued mortgage pain. The availability of sub-2% fixed mortgages in February 2022 contrasts sharply with current offerings, presenting a significant shock for those transitioning to new deals.
While the Bank of England has held its base rate at 3.75% for five consecutive meetings, recent votes show a split within the Monetary Policy Committee, with two members advocating for a 0.25% increase in July. Most economists anticipate a hold this week, followed by a potential 0.25% rise in November. Speculation also suggests multiple base rate hikes could occur between February and July 2027, potentially increasing the base rate by 1.25%. Springall suggested a surprise rate hike this week is possible, which would further disappoint borrowers and underscore that fixed mortgage rates are not solely tied to Bank of England base rate adjustments.