Three major UK lenders have increased their mortgage rates, signaling a potential reversal of recent downward trends, as renewed conflict in the Middle East fuels inflation fears. Nationwide, Barclays, and Virgin Money announced rate hikes, reversing months of steady reductions that followed a period of apparent stabilization in the region.
The conflict's resurgence raises concerns about potential disruptions to oil and gas supplies, particularly through the Strait of Hormuz, which could drive up energy costs and other household expenses. This uncertainty has already impacted government bond yields and swap rates, key components banks use to price fixed mortgage products.
Barclays initiated the shift, increasing some rates by as much as 0.37 percentage points. Nationwide and Virgin Money followed suit, each raising rates by up to 0.35 percentage points. These increases are described by mortgage brokers as a "brutal blow for borrowers" and suggest an expectation that rates may continue to climb.
Jamie Elvin, director at Strive Mortgages, noted that global events can rapidly influence mortgage pricing, often leading to swift lender reactions. Jack Tutton, director at SJ Mortgages, suggested that the magnitude of some increases indicates lenders anticipate a prolonged period of rising rates, effectively undoing recent decreases.
Specific changes include Barclays' "Reward" five-year fixed mortgage for existing customers, with rates rising from 4.90% to 5.27% for those remortgaging with 15% equity. Other Barclays products, including a 5% deposit mortgage and rates for first-time buyers, have also seen increases. Remortgaging products have generally risen by 0.07%.
These adjustments contrast with trends observed earlier in the year. According to Moneyfacts, June saw the largest monthly fall in mortgage rates in nearly two years. However, the average two-year and five-year fixed mortgage rates have reportedly increased in the past 24 hours, now standing at approximately 5.47% and 5.49% respectively. The cheapest available deals are currently around 4.25%.
Sonia swap rates, which influence the pricing of fixed mortgages, have also trended upward, with five-year swaps reaching 4.3% compared to 4.05% a month prior. Concurrently, the price of Brent Crude oil has risen to $85 a barrel, up from a recent low of $71, though still below its early May high of $114.
Borrowers seeking new mortgages are advised to act quickly. Doug Miller, director at Lansdown Financial Services, recommends securing a rate up to six months before a current mortgage expires. He noted that while competition among lenders remains strong, widespread rate spiraling is not anticipated. Securing a deal early offers the best chance to lock in current rates before further increases.