Mortgage rates rise for the first time in three months – Concerns over "painful" budget plan by the Labour Party

Mortgage borrowers are facing an unexpected reversal after three months of declining interest rates. Experts urge swift action in securing mortgage agreements as rates could continue to rise. Both NatWest and Santander have increased interest rates for their fixed-rate mortgages, and market observers warn that more lenders might follow suit. This development has been triggered by rising swap rates, which serve as a key pricing mechanism for home loans. These have recently become more expensive due to concerns about potential government overspending. NatWest will raise its rates for two-year and five-year fixed mortgages by 0.3 percentage points from Wednesday. Examples include increasing the five-year fixed rate with a 40% deposit from 3.79% to 4.09%. Similarly, Santander has raised some of its rates by up to 0.22 percentage points. Data from Moneyfacts indicates the first interest rate increase in three months: the average two-year fixed rate rose from 5.36% to 5.37%, and the five-year rate from 5.05% to 5.06%. According to Justin Moy of EHF Mortgages, the uncertainty surrounding the upcoming "painful" budget plan from the Labour Party and rising oil prices illustrate the vulnerability of the economy. Borrowers should therefore act promptly to safeguard against further rate increases. Nonetheless, there is a general expectation that the Bank of England might cut the Bank Rate from its current level of 5% before the year's end, following its first rate cut in July after two and a half years. So far, the interest rates have fallen in line with the decline in swap rates, which gave hope for a continued downward trend by the central bank. Those interested in building societies or with contracts nearing expiry will have to face rising costs. Nicholas Mendes from mortgage broker John Charcol advises that with less than six months remaining on their fixed rate, one should now assess the options. Many banks allow for pre-fixation of new rates up to six months in advance, which can protect against future increases. Mendes notes that the latest change does not necessarily indicate a long-term directional shift, although the upcoming decisions by Ms. Reeves and the monetary policy committee in November are in focus.