HSBC has raised mortgage rates for a second time in a row. Other lenders are expected to follow suit, increasing the financial pressures on UK households.
Brokers warned other UK lenders will follow HSBC’s decision made on Wednesday. This would exacerbate the cost-of-living crisis in advance of an election in 2019.
In recent weeks, the number of mortgage deals that have been withdrawn or re-priced has increased as the financial market reacts to the stubbornly high inflation figures. This has altered expectations of the Bank of England’s ability to increase interest rates.
Sunak insisted that the government’s top priority was to reduce inflation and interest rates.
Labour leader Sir Keir starmer claimed Sunak had been distracted by political fighting in the Conservative party , at a moment when people were concerned about “their mortgage rates, their bills and the cost of weekly shopping”.
HSBC is one of the UK’s largest mortgage lenders. It announced that it would remove rates for residential mortgages available through brokers on Wednesday at 5pm, and then announce new prices on Thursday. Last week, the bank caught mortgage brokers off guard by withdrawing its offers at short notice and then repricing them earlier this week.
It said that the cost of funding has increased in recent days and we, along with other banks, have had to reflect this in our mortgage rate.
Lenders are concerned that the volatility of swap rates markets, which they use for pricing their fixed rate mortgages, will expose them. Adrian Anderson, director of broker Anderson Harris, stated that he is “confident” other lenders will follow soon. Andrew Montlake is the managing director of broker Coreco. He said that HSBC would not be the only lender to increase rates this week. He said that after HSBC had lowered and re-priced rates in order to process an influx of applications, “swap rate has moved up again, and they are still getting lots business, so they have to move them again.”
Simon Gammon said, “They are nervous about lending money at a loss.”
As mortgage costs rise, the issue is becoming more political. The fear among Tory MPs of a mortgage time bomb contributed to Liz Truss’ ouster as Prime Minister last year after her “mini Budget” spooked the markets and drove up interest rates.
Labour is trying to confuse the Truss financial disaster with the rise in mortgage interest rates. This suggests a pattern of Tory mismanagement. Sunak said that the current situation was different, and that the economy is “resilient”, and inflation has fallen.
Jeremy Hunt, the chancellor of the United Kingdom, said earlier on Wednesday that tackling inflation is the “number-one challenge”. He said the BoE has “no other alternative” than to increase interest rates in order to combat it. As a nation, we must do all that we can to help the Bank of England with their mission to eliminate inflation. “And that is our main focus.”
Santander announced on Monday that it would temporarily pull all fixed-rate and tracker mortgages from new borrowers, “in view of the changing market conditions”. Clydesdale Bank and NatWest, as well as Coventry Building Society, were among the lenders who raised their rates on home loans this week.
BM Solutions is a specialist lender for buy-to let properties that is part the Lloyds Banking Group. On Wednesday, it announced that rates would be removed from its entire range by Thursday night, with new prices to take effect on Friday.
Moneyfacts, a finance website, reports that the average rate for a residential fixed-rate product of two years was 5.9 percent on Tuesday. This is up from 5.26 percent at the start of May. In the past year, two-year fixed mortgage rates averaged 3.25 percent.
Estate agents are already feeling the rise in borrowing costs. Matthew Leonard, Winkworth’s director in Bath said that it was not yet hurting, but the market had “definitely quietened” in recent weeks.
Post Disclaimer
The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.
This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.
The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.