“Lenders are jittery” as Santander and NatWest raise mortgage rates

HIGH street banks Santander and NatWest are among the lenders increasing mortgage rates this week, sparking concern among brokers and advisers. 

The move comes after swap rates – the financial instruments lenders use to price fixed-rate mortgages – nudged upwards on the back of stubborn inflation data and a more cautious stance from the Bank of England.

Santander raised a number of residential and buy-to-let rates by up to 0.07 percentage points today.

While NatWest increased the rates on some of its fixed home loans by up to 0.2 percentage points yesterday..

They aren't the only ones – Nottingham Building Society and Coventry Building Society are also raising many of their prices.

But while some borrowers will face higher monthly payments, experts say the rises are more about short-term market jitters than a fundamental reversal in the overall downward trend.

Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said: “The recent repricing by Santander and NatWest reflects short-term market adjustments rather than a structural shift in mortgage rates. Lenders reprice in response to swap rate movements, which have risen modestly on the back of stubborn inflation data and the Bank of England’s more cautious stance.

“These fluctuations are part of a ‘bumpy’ downward trajectory: while the overall direction remains lower than six to twelve months ago, volatility in funding costs will continue to create occasional spikes.

“Borrowers should view these changes in context and avoid making decisions based on headlines alone. The prudent approach is to focus on affordability and long-term financial stability, while relying on brokers to monitor market conditions and identify the most suitable opportunities as they arise.”

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, pointed the finger at Westminster.

He warned: “Lenders hiking rates is an indictment of the government's fiscal policy. Lenders expect government borrowing rates to increase as the markets consider what a terrible job Rachel Reeves is doing at stimulating growth. 

"This doesn’t mean that the central bank rate won’t fall though, and those with a tracker mortgage will still benefit from this.”

David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, argued that the repricing is less about government or markets, and more about lenders themselves. 

He said: “These rises in rates seem to be more about lenders protecting their margins amid ongoing uncertainty than a signal that the mortgage market tide is changing. 

"Although average rates have inched down this year, any future cuts will depend heavily on inflation figures and our economic resilience, which will ultimately influence what the Bank of England decides to do.”

Jack Tutton, Director at Fareham-based SJ Mortgages, added: “The one thing financial markets don’t like is uncertainty and we have that by the truck load at the moment. It’s for this reason that we have seen the cost of borrowing increase to levels higher than they were last month.”

“A lot of lenders are holding their nerve while their margins are being squeezed, but it is not unsurprising that a couple couldn’t hold out and have made rate increases.”

“The future for mortgage rates will be dependent on what the Chancellor decides to do to fill the black hole that she finds herself with, come the Autumn Budget. I think it’s likely to be a bumpy road until then at least.”

Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, warned Reeves' economic policies are the “perfect storm for uncertainty”.

She said: “Whilst the overall trend has been downward, lenders are hedging their bets as we see the impact of Reevenomics.

"The fiscal cupboard is bare and the Government has few options to top up the coffers. It's a perfect storm for uncertainty in money markets.”