HSBC and Coventry Building Society Increase Mortgage Rates
HSBC and Coventry Building Society have both announced increases to their residential and buy-to-let fixed mortgage rates, effective from Friday and Monday respectively. This move comes as swap rates, which are critical in determining the pricing of fixed-rate mortgages, continue to rise due to inflationary concerns linked to ongoing events in the Middle East.
Swap Rates Experience Significant Volatility
While swap rates showed a slight settlement on Wednesday, they surged again on Thursday. Specifically, the 2-year swap rate increased by 6.4 basis points to reach 3.55%, and the 5-year swap rate rose by 6.6 basis points to 3.69%. This volatility is directly impacting mortgage pricing across the financial sector.
Brokers Warn of Further Rate Hikes
Financial brokers have indicated that these rate hikes were anticipated following recent increases in wholesale money market costs. They suggest that HSBC and Coventry are unlikely to be the only lenders adjusting their rates in response to market pressures.
Omer Mehmet, Managing Director at Trinity Finance based in Welling, commented on the situation, stating, "Ongoing events in the Middle East have pushed up swap rates this week and are now starting to feed through into mortgage pricing." He emphasized the rapid market shifts, noting that predictions of a Bank of England rate cut this month have now been replaced by forecasts of no cuts in 2026. Mehmet advised potential borrowers to secure rates promptly.
Market Uncertainty and Lender Responses
Adam Stiles, Managing Director at Helix Financial Partners in London, highlighted the impact of global events, saying, "The stark reality of recent global events has hit markets with great uncertainty, which has translated to huge volatility in swap rates. Coventry and HSBC won't be the first lenders running for the hills and increasing rates."
However, Nouran Moustafa, Practice Principal and IFA at Roxton Wealth in London, offered a more measured perspective. She explained, "Geopolitical tensions have pushed gilt yields and swap rates higher, and that inevitably feeds into mortgage pricing. That said, lenders have spent the past few years dealing with volatility and are far more cautious about overreacting."
Moustafa expects the immediate market response to involve a pause in rate cuts and selective repricing rather than aggressive increases. She stressed that mortgage rates are influenced by long-term funding costs, not isolated events. If volatility subsides, lenders may prioritize stability; if higher costs persist, gradual repricing could occur across the market.
Conclusion
In summary, the mortgage market is facing increased pressure from rising swap rates driven by Middle East tensions. With HSBC and Coventry leading the way in rate adjustments, borrowers are urged to act quickly to lock in favorable rates, while the industry watches closely to see if these market movements will be temporary or sustained.
