Nationwide Building Society has announced significant increases to selected fixed mortgage rates, with hikes of up to 0.19%, while Virgin Money has followed with rises of up to 0.14%. This move effectively signals the conclusion of the competitive mortgage rate war that characterised January, leaving borrowers facing higher costs.
Property Market Context and Expert Warnings
This development comes alongside Nationwide's latest data, revealing that average property prices rose by 0.3% in January, with annual house price inflation edging up to 1%. Financial experts have swiftly responded, cautioning that the era of declining rates appears to be over, with the path to lower borrowing costs now looking more protracted and uncertain.
Broker Reactions: A 'Kick in the Teeth' for Borrowers
Industry professionals have expressed concern over the sudden shift. Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, described the rate increases as "a kick in the teeth for borrowers that have been full of optimism lately". He expressed hope that this represents a temporary blip rather than the start of a sustained period of repricing, noting that rising swap rates are beginning to impact consumer offers.
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, pointed directly to inflationary pressures as the underlying cause. "With these increases from Nationwide, it's now pretty clear that the road to lower rates may be longer and less predictable than expected, as inflation has dug in its heels," she stated, emphasising that borrowers should take serious note when a major lender like Nationwide implements such changes.
The Inflation and Bank of England Dynamic
The consensus among advisers is that stubborn inflation and diminished expectations for imminent Bank of England rate cuts are driving wholesale borrowing costs higher, which is now being passed on to consumers. Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management in St Albans, issued a stark warning: "What these rate increases highlight is that the direction of mortgage pricing can change very quickly."
She elaborated that with inflation edging up and the prospects of a central bank rate cut receding, the market is adjusting, resulting in higher rates for borrowers. "This should serve as a shot across the bows to borrowers that rates can go up as quickly as they come down," Eatenton concluded, urging vigilance.
Looking Ahead: Uncertainty for Homeowners
While some brokers cling to the hope that positive news on inflation and potential future Bank of England action could improve the landscape in the coming weeks and months, the immediate outlook has undeniably darkened. The simultaneous rate hikes from two major lenders mark a pivotal moment, ending a brief period of relief for borrowers and introducing a new phase of financial uncertainty for those seeking or renewing mortgages.
