NatWest has increased mortgage rates by 0.2% across its entire range, despite official figures showing inflation falling to 2.8% in April from 3.3% in March. The move has prompted fears among brokers that other lenders will follow suit amidst ongoing market uncertainty.
Rate Rise Details
From Thursday, May 21, the lender is applying a blanket 0.2% increase to purchase, remortgage, and buy-to-let rates. Suffolk Building Society has also withdrawn all fixed-rate products and will not replace them for now, as lenders struggle to secure funding at reasonable rates.
Brokers described the move as inevitable, pointing to the ongoing conflict in Iran and the government leadership process as key factors driving uncertainty in financial markets.
Broker Reactions
Justin Moy, Managing Director at EHF Mortgages in Chelmsford, told Newspage: "Inevitable news from NatWest this morning: the cost of borrowing has increased over the last week or so, not only due to the conflict but also to government unrest, which just spooks the markets even more. Uncertainty just drives rates higher and costs borrowers more in the long term."
He added: "A blanket 0.2% increase across purchase, remortgage and BTL rates is more than enough to make a difference, and just shows that inflation is not the only factor in mortgage pricing."
Martin Rayner, mortgage broker and financial adviser at Compton Financial Services, said: "The mortgage market lags wholesale swap rates, so NatWest increasing rates and Suffolk BS axing its fixed rates is no shock. More lenders will follow as funding costs bite hard."
Advice for Borrowers
Rayner suggested that tracker and discount rates may appear cheaper currently, but warned: "A fixed rate is the market's best guess at the average cost over the term. Rising rates make trackers tempting today, yet they'll climb fast tomorrow. Theory says a two-year tracker should cost the same as a two-year fix. The reality is that only one gives you certainty."
He advised borrowers to stick with fixed rates for peace of mind in volatile markets: "Unless you've got a specific plan or a killer deal, stick with fixed for proper peace of mind in choppy markets. Borrowers, don't chase the cheapest headline if it leaves you exposed to hikes. Stability might even be better for your health – no stressing over every Bank of England decision for the next two years."
