Swap rates have risen in the past week after US inflation came in higher than expected and economists seem to be divided about what this means for UK interest rates
Five major lenders – NatWest, Barclays, Accord, Leeds Building Society and HSBC – have all announced rate hikes so far this week, as concern grows that interest rates may not drop as quickly as expected.
Swap rates have risen in the past week after US inflation came in higher than expected and economists seem to be divided about what this means for UK interest rates.
John Charcol head of marketing Nicholas Mendes says: Swaps rose at the end of last week after recent data announcements in the UK and US, with speculation building momentum of a delayed bank rate cut being pushed out to August. This adds to the possibility of two or three bank rate cuts this year diminishing.
And Simon Gammon, managing partner at Knight Frank Finance, says: This is bad news for borrowers that will undoubtedly take some of the momentum out of the recovery. The lenders were eager to avoid putting up rates, but they have been doing business at thin margins and increasing swap rates have left them with little room to manoeuvre.
He added: That said, these hikes are likely to be comparatively small for the time being and should be followed by a period of stability until reductions to the base rate come into view. This means needs-based buyers will continue to dominate activity until mortgage rates begin dropping more meaningfully again.
Danny Belton, head of lending at the Mortgage Advice Bureau, says: We have become familiar with mortgage rates declining, but rates are now picking up again, with several lenders repricing this week. Swap rates have risen marginally on BoE interest rate expectations, and this is prompting a shift in the market. Prospective buyers and remortgagers should not panic, though.
