Lender NatWest has been called out by commentators after it announced significant increases to its landlord mortgages.
The bank, which is till 38% Government owned, announced late yesterday that it was increasing the interest rates it charges on a range of home loans, including products across four mortgages for buy-to-let (BTL) purchases and one switcher range for landlords.
As well as increasing rates, NatWest has reduced the ‘end date’ of two BTL mortgages fixed rate periods, cutting a month off two-year and five-year fixed loan packages.
NatWest has increased its rates across all mortgage types, but appears to believe landlord mortgages are the riskier in the current economic climate, with rates rising most steeply for landlords compared to home movers, first timers and Help to Buy customers.
“Some increases are as much as 1.38% on specific deals, with a more palatable but unwelcome 0.2% increase across their standard products for remortgages and purchases. When will it end?!,” says Justin Moy of EHF Mortgages.
Luke Thompson of PAB Wealth Management adds: “Given these latest rates, it seems obvious that NatWest don’t want to be in the buy-to-let mortgage arena right now.
“My assumption is that they want to see where swap rates will go in the coming weeks and once they have a bit more of an idea on that front they may start to price buy-to-let products more competitively again.”
So what’s going on?
The events of last autumn when Liz Truss and Kwasi Kwarteng frightened the financial markets with their fiscal policy launch, brought the term ‘swap rates’ under the spotlight.
In the case of mortgages, swap rates are used by lenders to acquire funding for a set period of time – usually two, three, or five years, which is used for fixed-term mortgage deals.
Richard Fearson (pictured), CEO of Leeds Building Society, explains: “Swap rates are based on what the market thinks interest rates will be in the future.
“The change in bank base rate expectations meant that swap rates increased sharply – by 0.7 per cent when comparing today’s two-year swap rate to that of 11 May (following the last MPC decision).
“As a consequence, many lenders have had to change the price of their fixed-rate deals. If swap rates move rapidly, as we saw in the Autumn, lenders may have to pause or withdraw products both to manage service, but also because surges in demand use up the funding set aside for the fixed-rate deals that are on offer.”
The next MPC decision is due on the 22nd June.
