Five lenders hike mortgage prices as interest rate threat looms

Five lenders raised their mortgage rates at the beginning of the week, as the Bank of England's potential interest rate hike looms over the UK economy. Barclays increased rates on multiple products by nearly 0.2%, with its two-year fixed rate reaching 5.53% and five-year fix at 5.48%. TSB, a high street unit acquired by Santander last year for £2.7 billion, also raised a series of residential mortgage products by 0.15%.

Santander, Skipton Building Society, and Nottingham Building Society joined the others in increasing their rates. The surge in mortgage rates has been fueled by market volatility, primarily driven by the re-pricing of swap rates, which serve as a benchmark for pricing fixed-rate mortgages and reflect future interest rate expectations.

The average five-year fixed-rate mortgage climbed to 5.68% from 5.64% on Friday, marking the highest average since May 11th. The average two-year mortgage rate surged to 5.63% from 5.6%. Experts predict more rate adjustments in the coming days due to the recent upward pressure on swap rates. Brent crude prices neared $100 per barrel, a concerning sign for inflation and higher gilt yields, hovering near the 4.5% mark.

The Bank of England maintains interest rates at 3.75% but has expressed caution in previous Monetary Policy Committee meetings. The committee will meet again on September 16th for its next decision, with some analysts predicting an interest rate hike as early as November. The Bank's chief economist, Huw Pill, has urged for a prompt increase and criticized a "wait-and-see" approach.