Copy article

How is lenders upping rates impacting the market?

Journalist: Jake Carter, Mortgage Introducer

ended 09. February 2024

Nationwide has followed Santander in upping rates recently. How is this impacting the market? How is this impacting demand for the residential market presently? Why do you believe lenders are upping rates?

8 responses from the Newspage community

Copy all

Copy

Editor
Darryl DhofferVerified
Founder at The Mortgage Geezer
Most of the high street lenders have been fairly keen on attracting all levels of business since the start of the year, and its only now the taps are turning off with some lenders to manage service levels. In particular remortgage and product transfer business seems to be affected by recent hikes, and NEW purchase business currently lenders are doing what they can to hold favourable rates. Lenders are balancing their books, to ensure they are not saturated with remortgage and product transfer business, and trying to attract a steady flow of new purchase business, seems to be the order.
Copy

Editor
Ben PerksVerified
Managing Director at Orchard Financial Advisers
As rates increase, enquiries drop off and the residential market slows.

Lenders are upping rates for 2 reasons; they received an influx of applications during the rate war in early Jan and they need to stem the flow in order to maintain service levels. The other component to increasing rates is that SWAP rates have increased slightly. If its costing the lender more money to get the funds in, they'll pass that cost onto the borrower.

There is a lot more optimisim for the residential market this year, so whilst this short term increase in rates may slow things, I do not think it will bring the market to a grinding holt. Hopefully rate reductions are on the horizon.
Copy

Editor
Chris SchutrupsVerified
Founder at The Mortgage Hut / William James Wealth Management
We have seen a number of lenders announce today that interest rates are going to be increasing from tomorrow, Friday 9 February. I don't think it's started affecting the market or the consumers.

I think the expectation of most borrowers are still that rates are likely to come down, so it could be that complacency slips into the market and people get caught off guard when people consider fixing a rate six months before theirs is due to end and revue it monthly to make sure they are getting the right deal.

Over the last few weeks we have seen swap rates starting to creep back up for money and this has started to follow through in pricing a residential mortgage product.

It's likely as this continues people are going to start feeling it in their mortgage payments.
Copy

Premium
Denni Tyson0
Mortgage and Protection Advisor at Henchurch Lane Financial Services
I think the rate increases haven't been too dramatic and the increase in swap rates was always going to have some kind of knock on effect. I think many of the bigger lenders are being "positively cautious" with the market and were pleased to see the bank rate being held last week.

I haven't seen a decline in residential property enquiries as their is now an acceptance of the rates being this way for some time. I am sure that lenders will simply keep their "cards close to their chest" in the coming months and see how inflation data impacts the UK economy as a whole.
Copy

Akhil Mair0
Director at Our Mortgage Broker
The recent trend of lenders hiking rates adds fuel to the fire. Nationwide's decision to follow Santander in increasing rates highlights financial institutions' indifference to people's struggles.

Such rate increases have dire impacts, exacerbating the fragile state of affairs and making it harder for individuals and families to afford homes. The ripple effect extends beyond the residential market, dampening consumer confidence.

The demand for residential properties dwindles as rate hikes create daunting financial barriers for prospective buyers. This cycle deepens the divide between those with means and those struggling to make ends meet.

Urgent intervention from regulatory bodies like the FCA and Bank of England is necessary to ensure fairness and accountability in mortgage lending.
Copy

Jake Stott0
Founder at Knox Mortgages
As a mortgage broker in the UK, I’ve seen my fair share of market twists and turns. The recent rate hikes by Nationwide and Santander? It’s like everyone’s rushing to board a train that hasn’t even arrived at the station yet. We’re talking about a reaction to swap rate changes, even though the base rate hasn’t shifted an inch. It’s like putting on your winter coat because someone mentioned it might snow next week!

I personally think Nationwide and Santander might have jumped the gun a bit. It’s a bit hasty, like ordering a new umbrella just because one cloud appeared in the sky. But here’s the twist, if we see those inflation figures take a dip in the coming weeks, as many of us are expecting, it’s going to be a whole different ball game. It’s like waiting for the next episode of your favourite TV show,, you know something good is coming.
Copy

Scott Taylor-Barr0
Principal Adviser at Barnsdale Financial Management
After a period of prolonged rate reductions, we now appear to have hit the current rate floor. This means any changes in rates are less due to the funding costs of lenders and more to do with operational issues. So, if a lender finds themselves at the top of the mortgage rate chats, offering the lowest cost mortgage at that time, they are going to take in an awful lot of business. This in turn puts their systems and people under a lot of pressure and they will look to releive that by upping rates and taking themsevels out the spotlight. This however creates a domino effect, as the lender that was second is now first and they'll see a surge in applications putting pressure on them, so they too will up rates to move off the top spot. And so the process repeats until a lender clears the decks and then wants more business, so the activly reduce rates to move into top spot (or closer to it, depending on the sizr and capacity of the lender).
Copy

Peter Stamford0
Mortgage Expert at Stamford Home Finance
After an successful January lenders seem to be adjusting their approaches in response to the fluctuating market conditions. They are now trying to focus on new purchase business while also managing requests for remortgages and product transfers. Despite the increase in rates offered in February, primarily driven by swap rates, there is still a strong willingness to lend. These decisions are influenced by capabilities and a cautious outlook on inflation. The rate increases implemented by Nationwide and Santander have raised some concerns, but there is an expectation of further reductions in the near future based on economic data. Personally I remain optimistic, about the situation.