Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.
Major Lenders Raise Mortgage Rates Amid Middle East Tensions
Three major UK mortgage lenders have increased borrowing costs as concerns grow that renewed conflict in the Middle East could fuel inflation and delay further interest rate cuts. Nationwide, Barclays, and Virgin Money have all introduced mortgage rate increases, reflecting heightened market uncertainty following the escalation of hostilities in the region.
Nationwide has raised selected fixed and tracker rates by up to 0.35%. Virgin Money has increased selected two and five-year fixed rates by up to 0.35%, and ten-year products by up to 0.2%. Coventry has also repriced its residential and buy-to-let fixed-rate range.
These changes come after a series of mortgage rate reductions earlier in July, as lenders responded to shifting market conditions. The recent escalation in the Middle East has led to fears of disruption to oil and gas supplies through the Strait of Hormuz, which could push up energy prices and add to inflationary pressures. This has increased the likelihood that interest rates may remain higher for longer.
The uncertainty has already resulted in higher government bond yields and swap rates, which lenders use to price fixed-rate mortgages. According to Nicholas Mendes, mortgage technical manager at Charcol, swap rates briefly dipped below 4% at the start of July, prompting earlier rate cuts, but have since risen again due to events in the Middle East.
Jack Tutton, director at SJ Mortgages, noted that the recent increases by lenders are significant and suggested that rates could continue to rise. He also observed that the reductions seen after a recent peace deal have been reversed in a matter of days.
Despite the increases, competition between lenders remains strong, and analysts do not expect mortgage rates to rise sharply. A Barclays spokesperson stated that while some rates have increased, others have decreased or remained unchanged following a recent review.
These developments are relevant for letting agents and inventory clerks monitoring the impact of mortgage rate changes on the UK property market, particularly for buy-to-let investors and landlords.
Source: Property Industry Eye