Virgin Money announced a wave of rate increases across its fixed mortgage range following Labour’s Autumn Budget on Wednesday, hiking interest rates by up to 0.15%.
This comes as gilt yields spiked after the Chancellor’s speech, which some analysts have said signals “underlying uncertainty”.
Gilt yields are the interest rates on British Government bonds, known as gilts, and they influence swap rates – predictions of future interest rates that reflect the cost lenders incur when obtaining fixed-rate funds. As gilt yields rise or fall, swap rates typically follow, which in turn directly impacts mortgage rates.
However, brokers have said it’s too early to know whether this is a trend, as Accord Mortgages announced reductions at the same time.
Santander also announced a raft of mortgage rate cuts of up to 0.36%.
Sharing views on platform Newspage, Kelsey Phillips, head of specialist lending at Arose Finance commented: “Gilt yields and mortgage rates continue to fluctuate as the dust settles following the Austerity Budget.
“Santander were among the first to react with cuts while Virgin went the other way. This divergence suggests we will not see a normalised rate environment until after the market has clarity on the US election and the Monetary Policy Committee decision during the next two weeks.”
Ranald Mitchell, Director at Charwin Mortgages commented: “With Santander’s rate cuts of up to 0.36% on fixed mortgages, lenders are clearly competing despite a volatile market.
“The spike in 10-year gilt yields post-budget signals underlying uncertainty, so these reductions may be short-lived if conditions shift. For new borrowers, now may be the time to lock in a favourable rate, as mortgage prices could fluctuate in the weeks ahead.”
Kundan Bhaduri, property developer and portfolio landlord at The Kushman Group noted: “Rachel Reeves’ tax increases are swiftly coming home to roost, and the timing couldn’t be worse.
“As if the market wasn’t already volatile enough, we now see lenders like Virgin Money responding to Labour’s Budget by hiking mortgage rates. With rates rising with only a few hours’ notice, landlords and homeowners alike are left scrambling to absorb the shock.”
Ben Perks, managing director at Orchard Financial Advisers added: “Swap rates took an initial uptick yesterday in the immediate aftermath of the Budget and all eyes will be on them today.”
He pointed out: “The reductions from Santander will have been priced in ‘pre-Budget’ and it’s encouraging that nothing they heard yesterday deterred them.”
However, he noted: “As long as swap rates don’t rocket skyward, more lenders should reduce over the coming weeks.”
