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Coventry first mainstream lender to raise rates in what "could be a symbolic turning point for the mortgage market"

ended 09. October 2024

Coventry have this morning announced they are hiking selected residential rates, potentially following the ongoing uptick in swap rates. As the first bigger lender to do so, Newspage asked brokers if this could see more mainstream lenders hike in the days ahead and what their advice is to borrowers? Their views can be found below.

New borrowers

  • Increasing all Fixed rates at 65% - 75% LTV (Excl. Offset)
  • Increasing all 2yr & 5yr Fixed Remortgage rates at 80% LTV
  • Removing Cashback availability for all Fixed FTB rates at 65% - 80% LTV

Existing borrowers

  • Increasing all Fixed rates at 65% - 75% LTV (Excl. Offset)

14 responses from the Newspage community

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Simon Bridgland
Director at Charwin Private Clients
Readers should take note, as with the Coventry increasing rates, other larger lenders are sure to follow over the next week or two. With wholesale markets increasing costs to lenders, this is simply passed onto the nation’s borrowers. If you able to apply for your mortgage, whatever the type, just get on with it now. Secure your deal whilst you can, as we look set to see a reversal of the last few months' drops.
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Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
Now that a bigger lender such as Coventry have hiked, more lenders will likely follow suit. There is currently huge uncertainty around both the upcoming Budget, specifically how that Budget will be funded, and the ongoing conflict in the Middle East. Hopefully the increases aren’t too dramatic but this could be a symbolic turning point for the mortgage market.
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Adam Stiles
Managing Director at Helix Financial Partners
The great mortgage rollercoaster continues its ride with Coventry now increasing rates. SWAP rates have risen sharply this week, possibly spooked by the rumour mill and rhetoric coming out of the Treasury for the upcoming Budget, the conflict in the Middle East, and unexpected economic data released in the US recently. Time will always tell with these things but for now, we don't expect to see many lenders decreasing rates any further for the time being on certain products.
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Mark Scott
Director and IFA at Positive Advisers Ltd
With the uncertainty around the Budget causing rate volatility I have my team of mortgage brokers under strict instructions: “If clients need to make a mortgage decision they should make it quickly and secure a rate”. It may get a lot worse before it settles down again if Rachel Reeves spooks the market with planned changes to the government borrowing rules. Mainstream lenders will have to price upwards to follow those lenders more dependent on the whole sale money markets.
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Iain Swatton
Director at Exemplar Financial Services
The Coventry’s decision to raise residential mortgage rates signals that global tensions, particularly in the Middle East, are starting to affect the market. Combined with ongoing uncertainty in the UK economy, this move is a clear warning that other lenders may follow suit in the coming days. Just as confidence was beginning to return, these rate hikes could put pressure on borrowers waiting for the right time. If you’ve been holding off, now might be the time to act before conditions tighten further.
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Lea Karasavvas
Managing Director at Prolific Mortgage Finance
Coventry looks to be the first of many that will need to protect their position, given the movements in swaps over the past four days. At the close of play yesterday, swaps stabilised a little following an upward trajectory but we do expect more lenders to follow Coventry’s lead before the week is out. Our advice to borrowers is to lock down on opportunities available ASAP and hedge the market, as the threat of increasing oil prices and the Middle East conflict could see a negative impact on inflation.
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Michelle Lawson
Director at Lawson Financial
A few smaller and specialist lenders came out the starting blocks with rate rises yesterday following rising wholesale money costs. Coventry are the first of the bigger guns to announce rate rises and borrowers should take note. This could be service-related or precautionary as Virgin Money actually decreased their rates yesterday. Only time will tell.
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Rohit Kohli
Director at The Mortgage Stop
The downward trend in interest rates was never going to be a smooth slide down and there were always going to be bumps in the road. Coventry increasing this morning following the economic reaction to events in the Middle East was inevitable in some sense and will probably start the domino effect of other major lenders moving as well. Borrowers should be alert to today's movement from Coventry and decide if the wait and see approach is right for them or if they need to lock in a rate now and remove the risk of increasing rates.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Coventry will not be first lender to reprice upwards given recent market conditions but do have the decency to give two days' notice. This may be a wake up call to those expecting rates to continue to fall and waiting until they do that this is not the case.
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Craig Fish
Director at Lodestone Mortgages
Due to the Middle East tensions we are now seeing lenders increasing rates following a spike in swap rates. The world is a small place and unfortunately these increases mean smaller mortgages now being available, which will be a disappointment to many. It's likely that more lenders will follow, so it's advisable that borrowers don't delay decisions and lock in now.
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Justin Moy
Managing Director at EHF Mortgages
This is a significant move by Coventry BS, as the cost of funds has increased over the past few days and lenders with wafer-thin margins will have no option but to hike rates. It shows just how quick the UK market reacts to world issues, such as Middle East conflict, and that the choice of mortgage products should be right for your situation, not trying to beat the markets.
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
In a move that has raised eyebrows for borrowers, lenders have begun to increase rates, swimming against the tide of broader market reductions in previous months. This move underscores the complex dynamics currently at play, where short-term volatility is increasingly pronounced. This is due to lenders' heavy reliance on swap rates for pricing mortgage products, meaning that rapid movements in these rates can precipitate sudden changes in offerings. This relationship underscores the delicate balance lenders must strike between maintaining competitive rates and protecting their profit margins. Despite the long-term trajectory for mortgages remaining downward, these latest hikes indicate that this trend is likely to be interspersed with periods of volatility and uncertainty, leading to a capricious environment for borrowers. For many, the current market shifts will feel like trying to hit a moving target blindfolded, with the goalposts of affordability shifting unpredictably.
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Ben Perks
Managing Director at Orchard Financial Advisers
Coventry kill off any further hopes of a rate war and unfortunately more rises are on the way from big lenders. This is a direct response to the increasing swap rates ahead of the Autumn budget. It should just be a blip and the trajectory towards lower rates should continue, but it’s not great timing as things were starting to improve. Feels like another set back for a property industry that has been hammered lately.
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Hannah Bashford
Director at Model Financial Solutions
With the upcoming Budget looming, markets are jumping around like a toddler on a trampoline. Smaller lenders hiked rates yesterday and now Coventry follows suit. We could see more rate hikes over the next few days from the bigger lenders but with Virgin decreasing rates yesterday your guess is as good as mine.