Lenders hike rates in response to the rising cost of funds

Ryan Bembridge

February 27, 2018

Mortgage lenders including Santander and Halifax have increased rates in reaction to the rising cost of funding.

Halifax and Santander hiked their rates this week, as detailed in notifications sent to mortgage intermediaries.

Other lenders putting up rates include HSBC, TSB, Barclays, Fleet and Family Building Society.

Henry Woodcock, principal mortgage consultant at IRESS, said: “Swap rates have started to rise, recently by 15 basis points in a month, increasing costs to lenders.

“It is inevitable these costs will be passed on to the consumer.

“As the Bank of England has talked about interest rates rising sooner rather than later and more than once in the year, the pressure on swap rates is likely to increase – forcing lenders to pull some of their most competitive deals.”

Santander has notified brokers that from today it will increase rates on 2 and 5-year fixes, including Help to Buy products, by between 0.04% and 0.10%.

It will also raise some 5-year fixed rate product fees by between £500 and £900.

However Santander has cut trackers by between 0.15% and 0.30%.

Halifax yesterday raised rates by up to 0.20% on 2-year fixed rate homemover products at 90% and 95% loan-to-value.

It also increased 2-year fixed rate affordable housing, shared equity/shared ownership products at 90% LTV.

And it has raised 95% first-time buyer rates at 95% LTV by 0.19%.

Family Building Society is raising rates by between 0.10% and 0.35% across its owner occupier and buy-to-let ranges – although applications at the previous rate will be accepted until 6 March.

Rob Ashley-Roche, principal of Rest Assured Mortgages, said: “What generally seems to be happening is lenders are making 90% and 95% loan-to-value stuff more attractive.

“They’ve got more appetite, unlike a few years ago when high loan-to-value rates were really high and 60% were really low.”

Alan Ward, chairman of the Residential Landlords Association, reckoned buy-to-let landlords will be able to cope with the rate increases for now.

He said: “There is sufficient choice in the market for the increases not to be significant at this stage.

“It’s important to note that it’s not just about rates – it’s about the cost of fees and legals.”

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