The average two-year fixed mortgage rate is now 4.84 per cent according to Moneyfacts (Getty/iStock)
Several UK mortgage lenders have begun increasing interest rates as conflict in the Middle East continues to adversely impact economies worldwide.
Experts have raised concerns that inflation could rise as a result of the ongoing war, putting pressure on the Bank of England to hold off on further interest rate cuts.
Nationwide Building Society and HSBC UK have indicated that they will be pushing up some of their mortgage rates from Friday, including for some first-time buyers, home movers and people switching and remortgaging.
Coventry Building Society is also set to increase its mortgage rates on Monday.
When setting mortgage rates, lenders are heavily influenced by a financial market measure called “swap rates” which reflect the market’s view of which direction the Bank of England’s interest rates will go.
The average two-year fixed mortgage rate is now 4.84 per cent according to Moneyfacts, while the average five-year fixed rate is 4.96 per cent.
Nationwide is set to increase some mortgage rates from Friday (Alamy/PA)
Oil and gas prices have increased sharply in recent days as conflict in the Middle East intensifies, threatening to impact costs in the UK. Price rises would increase headline inflation rates, in turn making the Bank of England less likely to cut its rates.
This central interest rate – known as the bank rate – is the key influence on rates set by lenders for borrowing. Any rise has an adverse effect on mortgage holders, whose repayment interest can increase in response.
Adam French, head of consumer finance at Moneyfacts, said: “Some lenders have already paused or reconsidered planned rate reductions.
“Because fixed mortgage pricing is closely linked to swap rates, this sudden market movement risks halting the recent momentum towards lower mortgage rates just as borrower confidence had begun to build ahead of an anticipated rate cut.
“It serves as a stark reminder that mortgage costs are not driven solely by domestic policy decisions.
“Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.”
HSBC UK is set to increase some mortgage rates from Friday (PA)
The Bank of England held interest rates at 3.75 per cent last month, with governor Andrew Bailey commenting at the time that further reductions were likely later in the year.
The impact of the conflict in the Middle East has made this less predictable, with economic think tank the National Institute of Economic and Social Research forecasting earlier this week that high energy prices could force the Bank to increase interest rates to above four per cent.