Customers of some of the UK's largest banks have received a three-day alert ahead of a crucial financial deadline. This warning applies to those currently seeking a mortgage or planning to remortgage in the coming months.
Rate Cuts Announced by Major Banks
On Monday, Nationwide, Santander, Virgin, and NatWest all announced rate cuts. However, rising swap rates, which are used to price fixed-rate mortgages, could soon reverse these reductions.
Why Swap Rates Are Climbing
Wesley Davidson, director of Bristol-based FD Commercial, explained: "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 crude 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 two or three rate hikes by year-end rather than the cuts we were discussing in February."
Advice for Borrowers
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 May 21. If it comes in high, the next move could be a hike.
