NatWest and Nationwide raise borrowing costs, increasing pressure on the government to control the cost of living crisis .NatWest and Nationwide, two of the UK’s largest mortgage lenders, announced on Thursday they were increasing rates, piling further pressure on household budgets and the government as it tries to contain the cost of living crisis.
NatWest’s decision is the second rate increase this week. It mirrors a similar announcement made by HSBC on Wednesday, another of the major home loan providers.
Lucian Cook of Savills’ UK Residential Research said that the recent increases in borrowing costs will stretch the finances for prospective homebuyers. He said that the recent increases in borrowing costs would put a strain on prospective home buyers’ finances. It will be harder for borrowers who want to pass the stress test.
Recent weeks have seen an increase in the number of mortgages being withdrawn or re-priced as the financial market reacts to persistently high inflation data. This has changed the expectations of the Bank of England regarding how much it will need to raise interest rates.
As the issue of rising mortgage rates becomes more political, it poses a greater threat to Rishi Sunak’s government by escalating the cost-of-living crisis in the run up to an election next summer. This week, the prime minister said that his “number-one priority” is to reduce inflation and interest rates.
The fear among Tory MPs of a “mortgage bomb” led to Liz Truss’ ouster as Prime Minister last year after her “mini-budget” spooked the markets and drove up interest rates.
Marcus Brookes is the chief investment officer of Quilter Investors. He said that this year, 1.4mn fixed rate deals will come to an expiration, and rates are higher than they were when taken out.
He warned that the recession threat would grow as a result.
NatWest announced that it would be withdrawing some mortgage products and increasing rates on others up to 0.45 percentage points. It had already repriced some mortgages on the previous Tuesday. The bank said that it had seen “double the normal volumes of applications” making the move necessary “to ensure that applications can be assessed, completed and drawn down in a timely fashion.”
Nationwide, UK’s biggest building society, announced that it will also increase rates on Friday for a variety of products, by up to 0.7 percentage points. The company cited “the continued upward trend” of the swap rates, used by lenders to price their fixed rate products.
In recent weeks, the financial markets have responded to persistently high inflation figures as expectations have changed about how far Bank of England would have to increase interest rates. The volatility of swap rate markets has made it difficult to price competitively home loans.
Santander and the Family Building Society are among other mortgage providers who will announce pricing changes or withdrawals of products in this week. Clydesdale Bank, Atom Bank, Clydesdale Bank, Clydesdale Bank, and Clydesdale Bank.
Simon Gammon is founder and managing director of broker Knight Frank Finance. He said, “They are like buses. When you have one lender move, it reorders the list as to who’s most competitive.” It’s not unusual to see several lenders move within a short time frame if one large lender does. This makes it more difficult to navigate the market.