HSBC increasing mortgage rates on Monday

Swap rates have taken another jump today. So HSBC will be followed by other lenders in the coming days. Worrying times for Brokers and Borrowers.

Yet another increase is frustrating, but completely expected. Borrowers hoping for stability are caught in the crossfire as lenders reprice in lockstep.
It boils down to swap rates, the wholesale cost lenders pay to secure fixed-rate mortgages. Global volatility and market tension have pushed swap yields higher. HSBC, along with Halifax and Barclays, is passing those higher costs on to protect their margins.
Expect continued upward pressure and quick rate pullbacks. If you are looking to buy or remortgage soon, do not wait around, lock in a product now before the next wave of increases.

More mortgage rate increases have been expected as the cost of Oil, and subsequent pressure on UK inflation, gives Money Markets little option but to push Swap rates higher. It's a perfect example of how world events, out of our direct control, have huge knock-on effects on our finances, and ultimately increase mortgage costs. Engage early with your mortgage broker, so you can find a way forward, and be document-ready if you need to act urgently.

We're back in the volatile space we saw earlier this year, with tension in the Middle East and the oil price feeding straight into swap rates, and borrowers feeling it almost immediately. Lenders price off swaps rather than Bank Rate, so when those jump, repricing follows within days. What makes this one sting is how quickly it follows HSBC's last increase. In a market moving this fast, there is real value in a rate you can secure at no cost and still walk away from, because most offers let you switch to something better before completion. That gives you a floor while you keep watching, rather than being caught out by the next move. This is exactly where a good broker earns their keep: staying on top of it daily, keeping clients informed, and moving quickly when a window opens. My instinct is that the volatility stays with us while the geopolitics are unresolved, so I wouldn't expect a calm few weeks ahead.

HSBC's latest rate increase is not a surprise. They have actually been one of the last major lenders to move, so this was largely expected after recent increases elsewhere.

The wholesale mortgage market appears to have overreacted once again to geopolitical tensions in Iran, much like we saw earlier this year. This time, however, markets are also having to price in additional uncertainty around the Government's fiscal direction following a series of early policy announcements.

My expectation is that we will now see a period of relative stability unless the situation in the Middle East escalates further or the Government makes further significant economic announcements. Unfortunately, mortgage rates tend to rise like a rocket and fall like a feather, so even if funding costs improve, I expect any reductions to be gradual rather than rapid.

This is the second increase from HSBC this week which is worrying. I think we can assume this will continue over the Summer with tension in the Middle East increasing.

The reaction that matters is not today's. A UK sale takes around 120 days from offer to completion, so Monday's increase does not hit the market on Monday. It lands in November, when buyers who agreed a price this month find out what they can actually borrow. That is where rate rises really show up, in renegotiations and collapsed chains months later. Around one in eight fall-throughs already come down to lending or valuation problems.

On why, lenders reprice when funding costs and application volumes move. It is margin and service management, not a forecast about the economy.

My prediction for the weeks ahead is that asking prices will not react at all. Sellers price on what an agent told them their home was worth, not on swap rates. So the gap between asking and achieved widens, and more sellers quietly cut.