Major lenders hike some mortgage rates despite fall in base rate

Major lenders are hiking a selection of mortgage rates, despite the recent drop in the Bank of England base rate.

Nationwide Building Society, HSBC UK, Santander, TSB and Virgin Money are among those to have reviewed their ranges.

Britain’s biggest building society, Nationwide, said some new rates will apply to mortgage applications from Wednesday.

Among the changes, it is increasing selected two, three and five-year fixed- rate deals by up to 0.20 percentage points.

Nationwide said the new rates are reflective of the current swap rate environment and increase in mortgage rates seen across the market in recent weeks. Swap rates are used by lenders to price loans.

Some mortgage rates offered by Nationwide will decrease. It is reducing its “new business” two-year tracker rates by 0.25 percentage points to reflect last week’s Bank of England base rate cut.

Nationwide is also reducing rates on 10-year fixed-rate products by up to 0.11 percentage points as well as selected higher loan-to-value two-year fixed-rate products by up to 0.15 percentage points, to further improve its competitive position in those markets.

A Nationwide spokesman said: “Nationwide is not immune to the current swap rate environment and the changes we’re making on our fixed-rate range are reflective of that and the rate changes happening across the market.

“Our tracker rates are seeing a reduction to reflect last week’s bank rate decision. We continue to support existing customers with our pricing pledge and remain competitive and well-positioned in the market to support all borrowers.”

HSBC UK is increasing fixed-rate mortgages from Wednesday, when it will make further details available.

The bank said several factors are taken into account when setting mortgage rates.

Santander increased selected mortgage rates by up to 0.31 percentage points on Tuesday.

Among the changes, selected standard homeowner fixed rates across purchase, remortgage and green products were increased by up to 0.29 percentage points.

TSB said that two and five-year fixed first-time buyer and home mover rates had increased by up to 0.30%.

Virgin Money also announced increases to fixed-rate mortgages from Tuesday. Among the changes, selected two and five-year rates for home purchase were being increased by up to 0.15 percentage points.

Some Virgin Money mortgage deals were also being withdrawn as part of the shake-up.

Hina Bhudia, a partner at Knight Frank Finance, said: “It often takes one large lender to prompt a broader shift in mortgage pricing and announcements of rate hikes are now coming thick and fast.

“The outlook for interest rates has changed and the market needs to reprice as a result. The moves we’re seeing aren’t small either.

“We’ll need a real and enduring change in the inflation outlook for mortgage rates to begin falling again, which means the recovery is on pause for now.”

Last week, the Bank of England reduced the base interest rate to 4.75%, a quarter-point cut.

It marked the second time interest rates have been cut this year.

When the cut was made last week, some analysts predicted that it was unlikely to push some mortgage rates down immediately because it had already been “priced in” by lenders.

However, some variable rate mortgage deals, such as trackers, do follow movements in the base rate.

Nicholas Mendes, mortgage technical manager at broker John Charcol said: “While many lenders have opted to maintain their existing rates to preserve business volumes and service standards, those offering competitive pricing have been forced to adjust, likely due to applications levels.

“These influxes often stretch service levels, prompting rapid rate changes to manage demand effectively.

“Adding to the pressure, swap rates – key indicators used by lenders to price fixed-rate mortgages – have edged upward, further necessitating these adjustments.

“The combination of market dynamics and rising swap rates highlights the difficult landscape borrowers are navigating.”