HCBC, Nationwide and Virgin Money have become the first major high street lenders to push through increases in the cost of fixed rate mortgages since the start of the war in Iran.
The hikes will come into force tomorrow across much of their product ranges. Nationwide and Virgin Money said its rates will go up by as much as 0. 25% while HSBC has not disclosed yet the scale of its increases. A smaller lender Coventry Building Society will also raise it rates on Sunday.
Mortgage experts said the rises were likely to be followed by other major players following a spike in the City swap rates that benchmark residential mortgage rates. Wholesale borrowing costs have risen on expectations that rising energy prices will flow through to inflation, delaying further interest rate cuts from the Bank of England.
The Bank had been expected to cut its headline rate again on March 19 from 3.75% to 3.5% but this is now thought unlikely as to waits to assess the fallout from the Iranian war. There have even been predictions that rates could start to rise again to 4%.
The yield on the benchmark 10 year gilt has risen by around a quarter point from around 4.25% to 4.5% as investors bet that higher energy prices will put upward pressure on inflation later in the year.
Falling mortgage costs have helped revive the property market over recent months but another round of rate hikes could mean sub-4% deals disappearing within weeks.
A statement from Coventry Building Society said: “Mortgage pricing is closely linked to swap rates, and as these have moved in recent days we’ve had to adjust some of our mortgage rates too.
“While our rates will be increasing, we remain committed to offering competitive options to people looking for a new mortgage deal.”
Aaron Strutt, product and communications director of brokers Trinity Financial said: “If rates only go up by 0.25% then it won’t be as bad, but it seems like there is a long way to go before the conflict in the Middle East is resolved and this means more uncertainty in the money markets. This often leads to higher borrowing costs which are then passed onto consumers and lead to higher rates.
“It seems almost certain we are going to see a lot more rate changes over the coming days so if you are on the hunt for a mortgage, it is worth locking into a new deal now.
“There is a huge number of remortgages due this year and most borrowers can switch rates up to four months before their fixed rates expire. Delaying a decision to select a new deal could be costly especially if you have a larger mortgage loan.”
Average fixed rates have fallen steadily this year but are now starting to tick up again. Latest figures from analysts Moneyfacts show that the average 2-year fixed residential mortgage rate today is 4.83% up from 4.82%yersterday.
The average 5-year fixed residential mortgage rate is 4.95%, up from 4.94%.
