HSBC and Coventry Building Society have become the first major lenders to announce increases to fixed mortgage rates and signalling a potential turning point for borrowers after weeks of improving pricing.
HSBC confirmed that new higher fixed-rate pricing will take effect from tomorrow, while Coventry Building Society has notified brokers that its increases will be implemented from Monday. The moves are widely expected to trigger a broader repricing cycle across the market as lenders respond to rising funding costs.
The shift follows sharp movements in financial markets driven by escalating conflict in the Middle East, which has pushed oil and gas prices higher and reignited inflation concerns. Brent crude has surged above $80 a barrel while government borrowing costs have climbed, with the benchmark 10-year gilt yield rising to around 4.5%.
Higher yields and rising swap rates directly influence the cost of funding fixed-rate mortgages, meaning lenders often move quickly to adjust pricing when markets become volatile.
MIDDLE EAST CONCERNS
David Hollingworth (main picture, inset), associate director at L&C Mortgages, said: “We are now seeing the first big name lender moves begin to feed through. HSBC has this morning announced that its rates will be increasing tomorrow. Coventry has also given notice to the market that fixed rates will be hiked with effect from Monday.
“The conflict in the Middle East has led to market expectation of higher inflationary pressure causing rate cuts to be slowed or put on hold. That pushes up the cost for lenders when pricing their fixed rate mortgages, which can force rates higher.”
Markets had been expecting the Bank of England to cut Bank Rate at its next meeting on 19 March, but that outlook has weakened sharply as energy prices rise and inflation risks return. Traders have rapidly scaled back expectations of near-term rate cuts as geopolitical tensions intensify.
DOMINO EFFECT
Hollingworth added that once the first lenders move, others typically follow.
He said: “Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit. The current uncertainty means that this upward pressure doesn’t look likely to ease quickly, although there are signs that the market reaction is at least levelling off for now.
“In the short term it’s likely that these increases will not see mortgage costs rocket but it does look like the improvements made in recent weeks could unwind quickly.
“With such an unpredictable backdrop those borrowers that are considering a new fixed rate deal at the moment should be looking to secure the rate sooner rather than later.”
