Britain’s biggest building society rushed to raise mortgage rates yesterday amid a sell-off in the bond market sparked by renewed fears of high inflation.
Nationwide announced an increase of up to 0.45 percentage points from today on certain fixed and tracker home loan products – adding hundreds of pounds to annual repayments.
He was reacting to soaring interest rates in turbulent financial markets reminiscent of the collapse seen during Liz Truss’ short-lived premiership.
“It feels eerily like the post-mini-budget period of last year,” said Jamie Lennox, director of mortgage broker Dimora.
Nationwide said market interest rates had “continued to fluctuate and more recently to rise leading to rate hikes”, adding: “This change will ensure that our mortgage rates remain sustainable.”
Yields on UK bonds, known as gilts – the yield demanded by investors for government loans – are on track for the biggest rise, except for the mini budget, since 2008
Nationwide has announced an increase of up to 0.45 percentage points from today on certain fixed and tracker home loan products – adding hundreds of pounds to annual repayments
He was reacting to soaring interest rates in turbulent financial markets reminiscent of the crash seen during the short-lived tenure of Liz Truss (pictured)
Yields on UK bonds, known as gilts – the yield demanded by investors for government loans – are on track for the biggest rise, except for the mini budget, since 2008.
Two-year gilts hit 4.55% yesterday, with ten-year bonds at 4.38% – both were recently below 3%.
These help determine the rates offered by mortgage lenders, with Virgin Money raising select rates by 0.12 percentage points and Halifax announcing hikes of up to 0.2 percentage points on some fixed rate remortgage offers .
John Cronin, of stockbroker Goodbody, said other lenders were likely to follow Nationwide’s lead, adding that “loan customers are going to face higher prices”.
This marks a turbulent period paralleling the aftermath of the disastrous Kwasi Kwarteng tax cut mini-budget last fall, when a bond market meltdown led to soaring mortgage rates.
After Mr Kwarteng’s plans were abandoned by his successor Jeremy Hunt, markets calmed down and mortgage rates fell.
Mr Hunt insists he is sticking to this plan and resisting a renewed clamor to cut taxes. Yet that hasn’t stopped bond markets from going haywire, leaving homeowners to pay the price once again.
Markets are reacting to the likelihood that the Bank of England will raise interest rates more than feared.
After Kwasi Kwarteng’s plans in his mini-budget were scrapped by his successor Jeremy Hunt, markets calmed down and mortgage rates fell
Mr Hunt (pictured) insists he is sticking to this plan and resisting a renewed clamor to cut taxes Yet that hasn’t stopped bond markets from going haywire – again leaving homeowners to pay the price.
Those expectations were bolstered by figures this week showing that, although inflation has fallen below single digits for the first time since last summer, it is falling much more slowly than expected.
And the Bank is likely to be particularly worried about a measure of “core” inflation – which excludes food and energy prices – hitting its highest level in 30 years.
This suggests that the price increases initially caused by factors such as the war in Ukraine could take root in the economy.
The broader economic outlook is brighter, with the IMF dropping its recession warning for Britain this week.
Yet even that has a dark side for borrowers, as the Bank of England will be less likely to worry about rate hikes dampening GDP. Markets now expect the Bank Rate to rise to 5.5% later this year.
David Hollingworth, of mortgage broker London & Country, said transactions below 4% on fixed rate mortgages were “already a memory”, adding: “Borrowers considering a fixed rate will want to act quickly”.
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