October 15, 2024 1:33 pm

Insert Lead Generation
Nikka Sulton

Mortgage rates may be on the rise once again, as both Santander and TSB prepare to increase the interest rates on certain fixed-rate mortgage deals. This development has caught the attention of homebuyers and industry experts alike, as fluctuations in mortgage rates can significantly impact affordability and demand in the housing market.

Santander, which temporarily withdrew several of its mortgage offerings last Friday, has confirmed that these deals will soon be reintroduced with higher interest rates. The bank’s decision to adjust its mortgage rates comes amid ongoing changes in the economic landscape, which continue to influence lender strategies and customer options.

Starting tomorrow, Santander will increase some of its fixed rates by as much as 0.22 percentage points. This change is part of a broader trend that could see other lenders following suit, leading to a shift in the mortgage landscape. For potential homebuyers, understanding these changes is crucial for making informed decisions about their financing options.

With the prospect of rising rates, borrowers may feel pressured to act quickly before rates increase further. As the market evolves, it will be interesting to see how these changes affect buyer sentiment and the overall housing market in the coming months.

Starting tomorrow, TSB will implement an increase in mortgage rates on five-year fixed deals, specifically aimed at first-time buyers and home movers. The adjustment will see rates rise by as much as 0.25 percentage points. This change reflects the lender’s response to current market conditions and is part of a broader trend in the mortgage industry, as lenders adjust their offerings to align with economic shifts.

In addition to the five-year fixed rate increases, TSB will also raise the rates on two-year fixed deals by up to 0.1 percentage points. This adjustment signifies the bank’s approach to managing its mortgage products in light of ongoing economic developments. For many potential buyers and homeowners, these changes may influence their decisions as they navigate the home-buying process or consider refinancing their existing loans.

Furthermore, homeowners who are looking to remortgage will not be spared from these increases, as TSB will also raise rates on its five-year fixed deals for remortgaging purposes by up to 0.25 percentage points. Such moves could affect many homeowners who are seeking to secure better terms or switch to different mortgage products. 

Overall, these rate hikes by TSB indicate a cautious approach in a dynamic lending environment, where interest rates are continually being evaluated. As lenders adjust their offerings, potential borrowers will need to remain vigilant and informed about the changing landscape to make the best financial decisions for their circumstances.

Until last week, mortgage rates were trending downward, providing some relief for potential homebuyers and those looking to remortgage. From the start of July until the end of last week, the lowest five-year fixed mortgage rate fell significantly from 4.28% to 3.68%. This decline in rates offered a more attractive option for borrowers who were seeking stability in their mortgage payments over a longer term.

In addition to the five-year fixed rates, two-year fixed mortgage rates also saw a notable drop during the same period. The lowest two-year fix decreased from 4.68% to 3.84%, making it easier for homeowners to access affordable short-term borrowing. This reduction in rates was welcomed by many, as it contributed to an overall more favourable lending environment.

However, the trend has taken a turn as of this week. The lowest available five-year fixed rate has risen slightly to 3.79%, signalling a shift in the mortgage market. Similarly, the lowest two-year fixed rate has increased to 3.99%. These adjustments may impact the decisions of many prospective buyers and current homeowners considering refinancing options.

The recent increase in mortgage rates could be attributed to a variety of factors, including market reactions to economic indicators and lender responses to changing conditions. As mortgage providers reassess their offerings, borrowers may need to act quickly to secure competitive rates before they potentially rise further.

This change in mortgage rates underscores the importance of staying informed about market trends and seeking advice when navigating the home financing landscape. Homebuyers and those looking to remortgage should carefully evaluate their options to ensure they make the best decisions for their financial situation in a fluctuating market.

 

Why are mortgage rates rising? 

Mortgage lenders consider a range of factors when determining their fixed mortgage rates. These factors include borrower demand, general economic conditions, and the lenders’ own profit margins. The interplay of these elements ultimately shapes the rates that consumers see when they are looking to secure a mortgage. Understanding how these factors influence rate setting can help borrowers make informed decisions in a fluctuating market.

One key indicator that lenders watch closely is the swap rate, specifically Sonia swap rates. These inter-bank lending rates offer valuable insights into what lenders anticipate regarding future interest rates. By examining these rates, consumers can gain a clearer understanding of potential movements in fixed mortgage rates. Essentially, swap rates serve as a barometer for the broader lending landscape and reflect lenders’ expectations of economic trends.

When Sonia swap rates increase, fixed mortgage rates often follow suit. This relationship occurs because higher swap rates indicate that lenders expect future interest rates to rise. Conversely, when swap rates decline, fixed mortgage rates typically decrease as well. This dynamic is critical for borrowers to grasp, as it can directly impact the cost of borrowing over time. 

Recently, Sonia swap rates have shown a notable upward trend. As of 10 October, the two-year swap rates reached 4.03%, while the five-year swaps were at 3.79%. This represents a significant shift in the rates that could influence mortgage pricing. Borrowers should take note of these changes, as they could signal a shift in the cost of new mortgage products.

This increase in swap rates marks a change from just a month ago, when two-year swaps were recorded at 3.74% and five-year swaps at 3.38%. The rise in these rates suggests that the mortgage market may be entering a new phase, which could affect the availability and pricing of mortgage products. For potential homebuyers and those considering remortgaging, staying informed about these trends will be essential in navigating their options in the coming months.

It is uncommon for the lowest fixed mortgage rates to drop below the corresponding Sonia swap rates. Chris Sykes, the technical director at mortgage broker Private Finance, indicated that he expects to see more lenders increase their rates in the upcoming weeks. 

He noted, “The margins lenders have been working with on rates have been very slim for the past few weeks, and it’s understandable that these margins cannot be sustained. This is why we are starting to see some rate increases and adjustments.” 

Sykes emphasised that the situation isn’t alarming; rates haven’t surged dramatically. Instead, only some leading rates have seen slight increases, bringing them back to levels similar to those from a month ago, rather than four months ago.

Looking ahead, Sykes believes it’s unlikely that rates will decrease significantly unless the Bank of England decides to implement a reduction greater than 0.25% in the November Monetary Policy Committee meeting. Additionally, he mentioned that a release of notably positive economic data could significantly impact Sonia swap rates.

In the short term, with swap rates on the rise, Sykes wouldn’t be surprised to see a few more rate increases. However, he predicts these increases will be modest, likely ranging from 0.1% to 0.2%. According to him, such changes should not drastically affect ongoing transactions.

 

 

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}
>