Frequent but modest repricing highlights swap-rate risk for borrowers nearing the end of fixed deals
After several weeks of mortgage rate cuts, major lenders are now nudging pricing higher, prompting brokers to warn of a more volatile pricing environment and the risk of complacency among borrowers with deals ending this year.
Brokers report that rate changes are becoming more frequent, even if the individual rate moves remain modest. “We are getting a lot more rate changes now but thankfully they are not going up by much,” noted Aaron Strutt (pictured top left), product and communications director at Trinity Financial.
“Barclays has put its rates up a couple of times recently but will still have two-year fixes from 3.65% after this latest rise. Santander still has rates starting from 3.51% for the moment but these may well rise soon.”
The latest repricing comes against a backdrop of expectations that the Bank of England will announce a base rate hold today, with markets looking ahead to possible cuts later in the year.
“There seems to be more of an expectation that the base rate will come down in April so fixed rates are likely to fluctuate for a while but ultimately offer good value for money to borrowers,” Strutt said.
Nicholas Mendes, mortgage technical manager at John Charcol, however, stressed that fixed rate products are being driven more by swap markets than by the Bank of England’s decisions at monetary policy meetings. “Swap rates have edged higher recently, so some lenders are reflecting that in their pricing,” he said.
Earlier this week, Nationwide, Santander, HSBC and Barclays all announced increases on a range of their fixed-rate mortgage products.
“If swaps remain elevated, it would not be a surprise to see other high street lenders follow with similar repricing over the coming days,” Mendes added.
“The key point for borrowers is that a base rate hold does not automatically mean mortgage rates fall. If funding costs rise, mortgage rates can move up, even with no change from the Bank of England.”
Meanwhile, brokers are counselling clients to expect smaller, incremental moves rather than a sustained downward trend in the near term, with continued competition between lenders but greater day-to-day uncertainty.
“In the near term, it would be sensible to expect smaller, more incremental moves rather than significant reductions over the next few weeks,” Mendes said. “Competition will still exist, but pricing is likely to remain changeable as lenders respond to funding costs and demand.”
Strutt noted that underwriting changes are helping to keep cases moving despite the rate noise. “All of the recent criteria changes are good for the market, and with so much remortgage business this year, most brokers have a lot to be getting one with,” he said.
Borrowers approaching the end of their fixed terms are also being urged to review options early and to keep applications under active review, given the pace of repricing. “If your fixed rate ends in the next six months, it is worth reviewing your options now rather than later,” Mendes said.
“Many lenders allow borrowers to secure a new deal well ahead of time, and a broker can help compare the true overall cost, navigate criteria, and keep the application under review so you can move quickly if pricing improves.”
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