Mortgage borrowers face higher costs as leading lenders respond to a rise in swap rates.
HSBC and NatWest are among the biggest banks to have increased rates since the start of September, according to analysis by Moneyfactscompare.co.uk, with further repricing expected in the coming days.
Lenders are reviewing their margins after swap rates rose above their levels of a month ago. In late February, the five biggest high street banks — Barclays, HSBC, Lloyds Bank, NatWest and Santander — priced their lowest-rate deals at about 0.29% above the two-year swap rate.
Only a small number of lenders have withdrawn fixed-rate mortgages since the beginning of September. Family Building Society is among those to have removed products, in what Moneyfacts said was likely to be a temporary measure.
The pace of withdrawals remains well below that seen in March 2026, when lenders reacted to a sharp increase in swap rates following the start of conflict in the Middle East.
A 0.25% increase in a typical two-year fixed-rate mortgage would add about £38 to monthly repayments, or £456 a year, Moneyfacts calculated. The estimate is based on a rate rising from 5.63% to 5.88% on a £250,000 mortgage over 25 years.
Rachel Springall, finance specialist at Moneyfactscompare.co.uk, said: “The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates. Major lenders, which include HSBC and NatWest, have increased rates since the start of September.
“The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages, with more moves expected in the coming days. Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages.
“Lenders look at margins very carefully, so it would be unwise to price their deals too low, if the expectations are for interest rates to rise, even if over the short-term.
“Mortgage rates are rising due to the escalating military conflict between the US and Iran, reigniting inflationary fears. The UK 10-year gilt yield has also risen further above 5% to an 18-year high recently due to a global bond sell-off, adding further pressure to the wholesale funding costs that underpin fixed mortgage pricing.
“However, the hit to the mortgage market over recent days pales in comparison to when the conflict in the Middle East began around six months ago, when many lenders pulled fixed rate deals.
“While this alone might still not reassure some borrowers, it is worth noting that the pressure on swap rates over the past six months has not been caused by UK fiscal policy, which is why withdrawals and rate hikes are nowhere near the scale experienced in the aftermath of the ‘mini-Budget’ in 2022.
“Borrowers expecting mortgages rates to drop in the coming weeks have had their hopes dashed. The prolonged conflict increases the chances for the Monetary Policy Committee to vote for an increase to the Bank of England Base Rate (BBR).
“However, this might not happen until November, according to economists. Regardless of any changes to BBR, it is still essential borrowers do not delay seeking advice to navigate the mortgage maze.
“Those looking to remortgage could do so around six months in advance by securing a product transfer with their existing lender, for peace of mind. Securing a fixed rate deal compared to falling onto a revert rate is still wise, as around £230* could be saved each month in repayments.”
