Nationwide and Virgin Money Implement Mortgage Rate Increases, Described as 'Kick in the Teeth' for Borrowers
In a significant move impacting homeowners and prospective buyers, Nationwide Building Society has today increased selected fixed mortgage rates by up to 0.19%, with Virgin Money following suit with hikes of up to 0.14%. This development represents a notable shift from the competitive pricing seen throughout January, delivering what one mortgage broker described as a "kick in the teeth" for borrowers who had been anticipating a continued downward trend.
Brokers Point to Rising Swap Rates and Stubborn Inflation
Industry experts have been quick to analyse the underlying causes of these increases. Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, explained the direct link to financial markets: "After a good rally throughout January, the rise in Swaps, which fixed rate mortgages are priced off, has inevitably meant that lenders have had little option but to increase rates." He urged existing borrowers to act swiftly to secure the best remaining deals, emphasising that time is now of the essence for paperwork completion.
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, directly attributed the hikes to persistent inflation figures: "With these increases from Nationwide, it's now pretty clear that the road to lower rates may be longer and less predictable than expected, as inflation has dug in its heels." She stressed the significance when a lender of Nationwide's scale implements such changes, suggesting it sets a market tone.
End of January's Price War and Market Correction
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, framed the announcements as signalling "an end to January’s price war." He identified rising SONIA Swap rates, which dictate the cost of wholesale funding for lenders, as the primary driver. "When swap rates rise, funding fixed mortgages becomes more expensive. Lenders must rapidly pull and reprice products to protect their profit margins," he noted, characterising the shift not as a crash but as a market correction acknowledging a slower, bumpier path to rate reductions.
Echoing the sentiment of a setback, Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, described the increases as particularly disheartening for optimistic borrowers but expressed hope it might be a temporary blip. His outlook hinges on future inflation data and potential Bank of England action: "Hopefully there will be more positive news in the coming weeks and months if inflation falls back into line and the Bank of England cuts rates further."
A Warning to Borrowers About Market Volatility
The rate changes have served as a stark reminder of mortgage market volatility. Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, issued a clear warning: "What these rate increases highlight is that the direction of mortgage pricing can change very quickly... This should serve as a shot across the bows to borrowers that rates can go up as quickly as they come down." She linked the pricing directly to diminished prospects of an imminent Bank of England rate cut being factored into wholesale costs.
Attention now turns to the Bank of England's forthcoming interest rate decision. Jack Tutton, Director at Fareham-based SJ Mortgages, stated: "It is no surprise that yet more lenders have moved to increase their rates following a sustained increase in the cost of borrowing for lenders." He highlighted that while a base rate cut this week is unlikely, the split in the Monetary Policy Committee's vote will be crucial for financial market reactions.
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, summarised the prevailing cautious hope: "With inflation higher than predicted, it was inevitable that lenders would put the brakes on and increase rates as SWAP rates rose. The hope is that this is just a blip and rates will continue trading downwards, but if inflation remains stubborn we may see further increases." This sentiment underscores the fragile balance between current economic data and future borrower prospects in the UK housing market.
