The lowest fixed rate mortgages are set to go above 4.5 per cent today as another high street bank raises its home loan prices.
NatWest announced it is raising rates on both fixed rate and tracker deals by up to 0.28 percentage points, heaping further misery on households needing to remortgage and home buyers.
It is the second time in less than a week that the high street bank has increased its rates, and will mean that some of the lowest rates on the market now vanish.
NatWest’s two-year fix for those buying with a 40 per cent deposit will rise to 4.75 per cent today, up from 4.47 per cent previously.
On a £200,000 mortgage being repaid over 25 years that’s the difference between paying 1,108 and £1,140 a month.
Little more than a month ago, the lowest fixed rate deals on the market were below 3.5 per cent, but these have risen by almost 4.5 per cent since the beginning of the Iran war.
NatWest’s repricing means the lowest two-year fix left on the market will be a 4.55 per cent deal with Nationwide Building Society. It also has the best five-year fix at 4.7 per cent.
Not again: NatWest’s latest mortgage repricing is its second in less than a week, following the previous increase announced on Wednesday 25 March
Why are mortgage rates rising?
Fixed rate mortgages have been going up due to a shift in future market expectations for interest rates.
As a result of inflation fears caused by the war in the Middle East, traders now think interest rates are more likely to rise than fall over the next 12 months.
Nicholas Mendes, mortgage technical manager at broker John Charcoal thinks rates will continue to edge higher in this uncertain environment.
Mendes adds: ‘One lender move rarely stays in isolation in a market like this. If inflation expectations remain under pressure, it is likely more lenders will continue adjusting their ranges.’
Aaron Strutt of broker Trinity Financial thinks the lowest rates could reach up to 5 per cent.
He said: ‘More of the bigger lenders are still pushing up their fixed and tracker rates. We do seem to be edging closer to the lowest fixes being priced between 4.75 per cent and 5 per cent.’
Nationwide, Halifax and HSBC have all upped their mortgage rates in the last week.
Justin Moy, managing director at Chelmsford-based broker EHF Mortgages, thinks 6 per cent mortgages are now a possibility.
‘There is a real chance that rates will push closer to 6 per cent by the end of April if we see no improvement in the Middle East over the coming weeks,’ he added.
