Oil-driven inflation risks keep swap markets on edge
NatWest and several other lenders are raising mortgage rates again at the start of the week, as mortgage pricing continues to adjust amid market uncertainty driven by higher oil prices and ongoing geopolitical tensions in the Middle East.
NatWest will raise rates across parts of its mortgage range from tomorrow, 31 March, its second increase in less than a week and fifth this month. The changes will affect new business, product transfers and additional borrowing, with many rates in its new business range rising by 28 basis points (bps).
“We kick off this week with more rate hikes,” commented Aaron Strutt, product director at Trinity Financial. “NatWest is the latest big lender to raise rates, but this time its fixes and trackers are both going up. NatWest’s two-year fixes are pretty much the cheapest in the market and its best buy 4.47% mortgage is rising to 4.75%.
“Tracker rates look much better value for money at the moment than many of the fixes, especially if you think the Bank of England base rate will have to come down this year rather than go up. NatWest is increasing its lowest tracker rate by 0.28% from 4.19% to 4.47%.”
Meanwhile, TSB is also implementing further price rises, increasing rates by 50bps on residential and buy-to-let mortgages for new customers from tomorrow. These follow earlier changes last week, including increases of up to 45bps on new business products announced on Friday.
Skipton Building Society is making additional adjustments, with rate rises of up to 25bps on fixed-rate products available to both new and existing borrowers.
Nicholas Mendes, mortgage technical manager at John Charcol, said the new rate hikes “point to another difficult week ahead, with lenders still trying to balance rising funding costs against service levels.”
“With oil moving back above $116 a barrel as the conflict has intensified, inflation risk remains very much in play,” Mendes said. “Markets had been hoping for a softer rate path earlier in the year, but that has become much harder to justify with energy prices rising again and concerns growing over wider disruption to supply routes.
“That matters for mortgages because when oil moves like this, markets start to question whether inflation will stay higher for longer or even begin moving back up. That then feeds directly into rate expectations and swap pricing.”
“The pressure on lenders is that fixed-rate mortgages are priced off future funding costs, and those costs remain both elevated and volatile. In that kind of environment, further selective repricing, product withdrawals, and short-notice changes look likely again this week.
“That is really the key point. One lender move rarely stays in isolation in a market like this. If inflation expectations remain under pressure and swaps stay unsettled, it is likely more lenders will continue adjusting their ranges behind NatWest rather than treating this as a one-off.”
Strutt added: “More of the bigger lenders are still pushing up their fixed and tracker rates and we do seem to be edging closer to the lowest fixes being priced between 4.75% and 5%.”
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