The government-backed lender NatWest has become the last big bank to raise interest rates on its mortgage products after last week’s market turmoil, dashing homeowners’ hopes of securing loans with rates lower than 4%.
In an unusual move for a high street lender, NatWest issued a notice to brokers on Sunday morning, saying it was increasing rates on a swathe of mortgages following a surge in demand.
Most of its rates, which previously hovered around 3-4%, are set to rise to between 4% and 6% from Monday, bringing it in line with its competitors.
It is understood that the bank had been struggling to keep up with a surge in applications after rivals temporarily suspended mortgage lending last week. The market turbulence – sparked by concern over the government’s mini-budget – made it difficult for banks to price their home loans accurately, resulting in 40% of mortgage products being pulled from the market by Thursday.
NatWest said in its note to brokers: “We’ve remained in the market, but with market conditions as they are we need to implement widespread changes to our product range.”
Lenders tend to avoid leaving rates lower than their competitors, amid fears they will be flooded with applications. It is understood that NatWest was fielding five times as many calls as normal last week.
Nicholas Mendes, of the mortgage broker John Charcol, said: “NatWest was one of the few lenders who hadn’t made any sudden changes. As a result, they have clearly felt the changes in the market are too volatile to remain still.”
He said it would have been “rather brave” of the bank – which is still 48% owned by the taxpayer after its financial crisis-era bailout – to stay in the market without changing rates. “Lenders don’t often like to let brokers down unless circumstances call for quick action. Releasing updates or changes over the weekend unfortunately means there will be clients waking up to a change of terms or even lenders as they look for a more competitive term.”
Mendes added: “This acts as a reminder that you cannot take anything for granted, and ensuring if you want to secure a rate making sure an application is made to the lender as quickly as possible.”
A NatWest spokesperson said the bank kept all of its products “under continual review in line with market conditions”.
