Foundation will withdraw some of its buy-to-let (BTL) products this afternoon and Vida is also set to pull 11 BTL deals at 5pm today.
Earlier this week, Gen H intended to reduce rates by as much as 0.2% but increased pricing instead, saying that the war in Iran had “quite dramatically pushed swap rates up overnight”.
As of 3 March, the two-year swap was 3.52% and the five-year swap was 3.65%, according to Chatham Financial.
HSBC has also reacted, with increases to its residential and BTL mortgage rates to take effect from 6 March. Changes will apply to products up to 95% loan to value (LTV).
Coventry Building Society will raise pricing on Monday, impacting all residential and BTL offerings.
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More lenders could follow suit
David Hollingworth, associate director at L&C Mortgages, said: “We are now seeing the first big name lender moves begin to feed through.
“The conflict in the Middle East has led to market expectation of higher inflationary pressure causing rate cuts to be slowed or put on hold.
“Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit. The current uncertainty means that this upward pressure doesn’t look likely to ease quickly, although there are signs that the market reaction is at least levelling off for now.
“In the short term, it’s likely that these increases will not see mortgage costs rocket, but it does look like the improvements made in recent weeks could unwind quickly.”
Stability more likely that dramatic rate changes
Nick Mendes, mortgage technical manager at John Charcol, said the outlook had “become a little more uncertain over the past few days”.
“The conflict has pushed energy prices higher and that uncertainty has quickly fed through into financial markets, with gilt yields and swap rates moving earlier in the week,” he added, saying swap rates had eased slightly today but were still higher than a week ago.
Mendes said: “That doesn’t automatically mean mortgage rates will jump, but it does reduce the pressure on lenders to keep cutting.
“The bigger shift has been expectations around Bank of England rate cuts. Only a couple of weeks ago, markets were confident we’d see a cut in March. That now looks less certain because if the conflict keeps oil and gas prices elevated, it could feed back into inflation and make the bank more cautious.”
Mendes said it was more likely there would be a “period of stability” in the near term, rather than dramatic moves.
He added: “Lenders had already priced much of the expected rate cutting cycle into current deals, so there isn’t huge room for mortgage rates to fall quickly unless swap rates move materially lower again.
“Most mainstream lenders also hedge funding in advance, so they won’t react immediately. But as those hedges roll off, if swap rates stay elevated, we will likely see some repricing filter through.”
Mendes said if the volatility continues, rates could edge up for a period, but if there is a ceasefire or tensions ease, the markets could quickly settle.
He added: “So, the short answer is that the conflict adds uncertainty rather than guaranteeing higher mortgage rates. The market still broadly expects base rate cuts this year, but the path there now looks a little less clear than it did even a week ago.”
