Several UK mortgage lenders have begun increasing their interest rates as concerns grow that rising energy prices linked to conflict in the Middle East could keep inflation higher for longer.
Nationwide Building Society has raised rates on some of its mortgage products by up to 0.25%. The changes apply to a range of 2-, 3-, 5-, and 10-year fixed deals and will affect new applications submitted from Friday. The updated rates cover products for first-time buyers, home movers, remortgaging customers and existing borrowers looking to switch deals.
Other lenders are also adjusting their pricing. HSBC UK confirmed it has increased mortgage rates for new customers by between 0.10% and 0.25%. Existing customers will see smaller rises, ranging from 0.04% to 0.13%. Coventry Building Society has also indicated that its mortgage rates will increase.
Mortgage pricing is heavily influenced by financial market “swap rates”, which reflect expectations about the future direction of the UK’s base interest rate. In recent weeks, swap rates have climbed as investors reassess how quickly the Bank of England will be able to cut borrowing costs.
The concern is that prolonged disruption in the Middle East could push oil and gas prices higher, raising the cost of goods and services across the economy. If inflation proves more persistent, the central bank may slow or pause planned rate cuts.
Last month, the Bank of England held the base rate at 3.75%. Governor Andrew Bailey said at the time that further reductions were likely later this year.
However, analysts at the National Institute of Economic and Social Research warned that sustained increases in energy prices could push rates back above 4%. The Bank of England will announce its next decision on 19 March.
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