January 21, 2025 3:16 pm

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Nikka Sulton

Barclays is the latest major bank to implement a rise in interest rates on its fixed mortgage deals, with a new increase set to take effect tomorrow. The bank will increase rates by 0.2 percentage points across the majority of its fixed-rate products, which are aimed at both home buyers and those remortgaging their properties. This marks a notable shift in the lending landscape as more borrowers could be facing higher costs when locking in mortgage rates.

In addition to the increase in fixed-rate mortgages, Barclays is also making adjustments to its buy-to-let offerings. For existing borrowers in this category, the bank is reducing rates by 0.45 percentage points. This move is aimed at providing more favourable terms for landlords looking to remortgage, as the buy-to-let sector experiences its own set of challenges amidst the broader economic environment.

This decision from Barclays follows a wave of similar actions taken by other high-street lenders. Banks such as Santander, HSBC, TSB, and Leeds Building Society all raised their home loan rates last week, as the mortgage market reacts to ongoing economic pressures. These increases are being closely watched by homeowners, first-time buyers, and those looking to remortgage, as they all face higher costs when securing finance.

The rise in mortgage rates is primarily driven by the increase in Sonia swap rates, which have been climbing steadily in recent weeks. Sonia swap rates, which represent the rates at which banks trade streams of interest payments with each other, are an important benchmark in the financial markets. These rates are used by lenders to gauge future interest rate expectations and ultimately play a significant role in how fixed-rate mortgages are priced. As a result, any fluctuation in Sonia swap rates can directly impact the affordability of home loans, adding uncertainty to the market for both borrowers and lenders alike.

Justin Moy, managing director at EHF Mortgages, spoke to the news agency Newspage, offering his insights on the recent surge in mortgage rates and the potential consequences for borrowers. According to Moy, the Government must intervene to help reduce borrowing costs before the UK enters a potentially damaging economic downturn. He stressed that with rising mortgage rates and increasing living costs, many households are already under financial pressure.

“Barclays is one of the last lenders to raise rates in response to the recent rise in swap rates,” Moy explained. “This brings them in line with many of their high-street competitors, but this doesn’t bode well for consumers who are already facing heightened costs.” He added that the Government’s intervention could be crucial in stabilising the housing market and easing the burden on borrowers. The broker’s comments come as concerns grow about the UK economy, with experts warning that the country is heading towards a recession if swift action isn’t taken.

Moy highlighted that although the rise in swap rates plays a role in increasing mortgage costs, it is ultimately the Government’s responsibility to protect homeowners from excessively high borrowing costs. He warned that if left unchecked, these rising costs could lead to further financial strain and create a ‘messy recession’ in the months ahead, with dire consequences for the housing market and broader economy.

 

What mortgage rates is Barclays changing? 

Barclays has recently announced a rise in its interest rates for two-year fixed-rate mortgages, impacting both homebuyers and those remortgaging. For buyers with a deposit of at least 40 per cent, the bank’s cheapest deal will increase from 4.23 per cent to 4.43 per cent. This change will also come with a product fee of £899, which will further affect the overall cost of the loan.

For a buyer securing a £200,000 mortgage over a 25-year term, the interest rate hike will result in a monthly payment increase of £23, from £1,081 to £1,104. This adjustment in repayments could add up to significant additional costs over the life of the mortgage, highlighting the growing impact of rising interest rates.

Alongside the changes to its homebuyer mortgage rates, Barclays is also adjusting its remortgage offerings. The bank’s lowest two-year fixed remortgage rate will increase to 4.47 per cent, accompanied by a £999 product fee. This rate rise follows broader market trends, notably the increase in Sonia swap rates, which play a key role in determining how fixed-rate mortgages are priced. As such, borrowers will likely feel the ripple effect of these market adjustments as more lenders follow suit in raising their rates.

This move by Barclays underscores a wider shift in the mortgage market, which has seen several other major lenders, including Santander, HSBC, and TSB, increase their rates in recent weeks. With the rise in borrowing costs, borrowers are advised to consider the long-term implications of higher monthly repayments and explore their options for locking in more favourable rates before additional increases take place.

 

 

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