Four of Britain’s biggest home lenders are pushing up interest rates amid turmoil on financial markets. The increases follow rises in so-called swap rates, which are the interest rates that financial institutions charge to lend to one another.
The rate moves are partly driven by the uncertainty created around the incoming Trump administration in America, which has brought threats of tariffs, resulting in higher inflation and interest rates in the USA, the UK and around the world.
The Rachel Reeves budget has fuelled the turmoil amid claims higher taxes and wages in Britain will push up inflation by more than previously anticipated.
Santander is upping rates aimed at home buyers and those remortgaging by up to 0.34 percentage points on some products.
It is also increasing the cost of fixed mortgages for those purchasing new build homes by up to 0.2 percentage points. HSBC is increasing rates across its fixed rate mortgages aimed at home buyers, those remortgaging and buy-to-let landlords. There are also some rises at TSB and Leeds Building Society.
Justin Moy, managing director at EHF Mortgages told Newspage: “This move from Santander was inevitable. With rising swap rates and most lenders operating on thin margins, they have little choice but to increase fixed rates.
“Any hopes of a rate war have clearly been dashed, with the government punting that opportunity out of the park.”
Ken James, director at Contractor Mortgage Services, said: “The direction of travel is definitely upwards for mortgage rates.
“Faced with a growing storm of bad economic news and extreme market volatility, lenders are beginning to batten down the hatches and barricade themselves in. We had hoped for a promising start to 2025 but it simply hasn’t materialised.”
Nicholas Mendes, mortgage technical manager at John Charcol believes there is no reason to panic, expecting the spate of rate increases to be a mere blip.
He told This is Money: “Overall, there has been a significant increase in swaps for lenders to continue holding pricing to the extent they have and these recent increases amongst the high street lenders is essential safeguarding their margins and service levels.
“This does not mean we are in for a rough period of continuous increases and I am sure if markets hold firm, we should see a reversal in today’s rate increases notices.”
