Two Big Six lenders increase mortgage rates as swaps rise

Nationwide Building Society and Santander have both announced increases to mortgage rates this week.

From tomorrow, Nationwide is increasing residential rates by up to 0.19% for both new and existing borrowers.

The increases apply to Nationwide's new member homemover and first-time buyer ranges across two, three and five-year fixed rates at all LTVs. Selected remortgage rates have also seen increases.

For new members, the lowest rate available is now a two-year fix at 60% or 75% LTV, available at 3.69% for new and existing members moving home.

Also taking effect from tomorrow, Santander is increasing residential and buy-to-let fixed rates in its new business and product transfer ranges.

In its residential home mover range, all 75%, 85% and 90% LTV two-year fixed rates increasing by up to 0.04% and all 60% and selected 75% LTV three anad five-year fixed rates will rise by up to 0.07%.

First-time buyer rates are rising by up to 6bps between 85-95% LTV and remortgage rates will increase by up to 4bps.

Buy-to-let purchase and remortgage rates will also see hikes of up to 4bps.

Hina Bhudia, partner, Knight Frank Finance, commented: “Swap rates have risen in the past fortnight as stronger-than-expected economic data has prompted investors to reassess their outlook for UK borrowing costs. If the economy remains this resilient, the Bank of England may only cut rates once more this year. 

“That’s exerting upwards pressure on mortgage rates and several of the larger lenders, including Nationwide, NatWest and Santander have announced increases in the past week. These are fairly small increases at the moment, but they threaten to sap momentum from the recovery in activity that was strong through January.”

Tom Bill, head of UK residential research at Knight Frank, added: "An underlying assumption of two Bank Rate cuts this year has become less certain in recent weeks. While markets were fully pricing in two quarter-point cuts on 14 January, they were only assuming a 45% chance of the same happening a fortnight later.

"The five-year swap rate, which is based on market expectations and used to price fixed rate mortgages of the same length, rose to 3.75% from 3.55% over the same period. It means you can expect fewer headlines about mortgage lenders dropping their rates."