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Homeowners are facing higher monthly repayments as several major lenders move to increase mortgage rates, despite a recent cut to the Bank of England’s base rate.
In recent days, Barclays, Nationwide, Virgin Money, and others have raised rates across a range of fixed mortgage products. According to financial data provider Moneyfacts, Nationwide has increased rates by up to 0.2%, affecting both first-time buyers and existing customers seeking to remortgage.
Barclays has also revised its rates upward, with its five-year fixed deal climbing from 3.95% to 4.05%, and its two-year fix rising from 3.75% to 3.85% for borrowers with a 40% deposit. Other lenders including Virgin Money, Halifax, and BM Solutions have implemented similar hikes.
The rate increases come amid a sharp rise in long-term government borrowing costs, with 30-year gilt yields hitting their highest level in 27 years.
These moves appear to contrast with recent monetary policy. Lat month, the Bank of England announced a 0.25% cut to the base rate, bringing it down to 4%. However, many market watchers now believe that further rate reductions may be delayed due to persistent inflationary pressures.
UK inflation ticked up to 3.8% over the summer, nearly double the Bank’s 2% target. This unexpected rise has fuelled concerns that the pace of monetary easing could slow, keeping mortgage costs elevated for longer than previously anticipated.
Hina Bhudia, partner, Knight Frank Finance, said: “We saw a handful of lenders edge fixed rates up after the Bank of England’s split decision last month and the stronger-than-expected wage growth that followed. What began as a marginal adjustment has now become a broader market move. Nationwide’s decision this morning to raise fixed rates by up to 0.2% marks a turning point – because they are typically the cheapest on the high street, and when they reprice, others tend to follow.
“In the past 48 hours, Virgin, Halifax and BM Solutions have also raised fixed rates, showing that momentum is building. The increases may only be a few tenths of a percentage point, but for borrowers that translates into a meaningful rise in monthly payments and will weigh further on sentiment already under strain from reports of tax hikes and likely changes to property taxation.”
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