Why are costs RISING after the Bank of England cut?

Five of Britain’s biggest mortgage lenders are increasing rates, despite the Bank of England cutting interest rates last week.

Why are banks increasing fixed rate mortgages?

The hikes to rates may seem counterintuitive given the Bank of England’s recent decision to lower the base rate to 4.75 per cent – the second reduction this year.

Mortgage brokers believe this is likely due to the rising cost of funding as a result of heightened inflation expectations after the Labour Budget and Trump election win.

Rohit Kohli, director at The Mortgage Stop told news agency, Newspage: ‘Many borrowers will be left scratching their heads as to why, less than a week after the Bank of England cut the base rate by 0.25 per cent, lenders like TSB are increasing fixed rates.

‘The markets are still feeling the aftershocks of the Labour Budget. Although it wasn’t as disastrous as the mini-Budget, the longer-term cost of borrowing continues to rise.

‘Gilt yields and swap rates are reacting not only to budgetary policy but also to geopolitical uncertainties, including Trump’s re-election to the White House. Anyone holding out for big cuts in interest rates is taking a gamble for now.’

What should mortgage borrowers do?

The advice to borrowers is simple: lock in a new fixed rate deal as soon as possible to avoid rates rising further.

A new mortgage offer often lasts for up to six months meaning homeowners can lock in a new rate well ahead of their current fixed rate deal ending.

For clients nearing the end of their fixed-rate terms, it’s essential not to delay in the hope that rates will revert to levels seen weeks ago,

Securing a deal now provides certainty in an uncertain market. There is always the option to review and adjust if circumstances change but acting promptly minimises exposure to further rate increases.

This development underscores the importance of staying informed and proactive when managing mortgage commitments in today’s rapidly shifting financial environment.

The full article can be read here

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