First-time buyers and those looking to remortgage have been urged to act quickly and lock in a mortgage rate, as rising swap rates could soon reverse recent price reductions. Swap rates, which are used to price fixed-rate mortgages, have been climbing due to a combination of factors including political uncertainty and rising oil prices.
Over the past few weeks, lenders have consistently cut rates to stimulate the market after a quiet spring and due to easing tensions in the Middle East. On Monday, Nationwide, Santander, Virgin, and NatWest all announced rate cuts. However, experts warn that tough new rhetoric from former President Trump, soaring gilt yields following local election chaos, and threats to Prime Minister Starmer's leadership could bring the run of rate reductions to an end within days.
Wesley Davidson, Director at Bristol-based FD Commercial, told Newspage: "Swaps are climbing for three reasons that reinforce each other. UK political risk has returned after Labour's local election losses and calls for Starmer to go, pushing 10-year gilts above 5.1%, their highest since 2008. Brent is back above $105 as the Iran situation drags on, feeding UK inflation through fuel and transport. On top of that, the Bank of England's Monetary Policy Committee has turned hawkish, with markets pricing 2-3 rate hikes by year-end rather than the cuts we were discussing in February."
Davidson added: "If swaps keep rising at this pace, recent fixed-rate cuts will stall within days and reverse within weeks. Lenders cannot absorb 20 to 30 basis points of funding cost without repricing. My advice to borrowers is simple: if you are remortgaging in the next six months, secure a rate now. If pricing improves before you complete, you can switch to the better deal. If it gets worse, you are protected. The next major test is the inflation print on 21 May. If it comes in high, the next move is a hike."
Borrowers are advised to act promptly to avoid potential increases in mortgage costs. The current environment of rate cuts may be short-lived, and locking in a rate now provides protection against future rises.
