At the middle of last week Nationwide slashed its rates to the most competitive of all in the current lenders price war – but just before the weekend it slammed into reverse.

It announced an increase of up to 0.3 per cent on fixed rates across its range from last Friday; in particular its two year and five year fixed deals were affected.

Most analysts put the move down to tight margins obliging many leading lenders to dip in and out of deals, while Nationwide in particular is thought to have been deluged with applicants quickly after its rate reductions – causing it to announce an increase within 48 hours.

This may not be the only lender to increase rates, especially following the Bank of England’s decision to freeze base rate at the high level of 5.25 per cent.

The Bank’s monetary policy committee was split late last week – two wanted a rise, six wanted the rate held steady, and one argued for a cut. It was the first time since March 2020 that a member voted for lower rates, and the first time since March 2008 that the committee was split three ways over whether to raise, lower or hold.

Karen Noye, mortgage expert at Quilter, says that the Bank’s decision to maintain interest rates at their current level throws recent moves by lenders to trim mortgage rates into stark relief. 

Noye now cautions: “Many lenders have been reducing deals with some reductions reaching up to 0.85 percentage points before this announcement. This competitive posturing ahead of the decision is a calculated response to the dual pressures of the market and the evolving expectations of monetary policy.

“The initial aggressive rate cuts by lenders since January and before have been sparked by the market’s bet on stabilised borrowing costs. This has evidently led to a mini war of rates, benefitting consumers but also revealing the market’s sensitivity to policy signals.

“Without the certainty of a further cut it seems unlikely that mortgage rates can fall much further. The rise in swap rates — an essential benchmark for pricing fixed-rate mortgages — signifies mounting pressures that could reverse the recent trend of falling mortgage rates. This scenario not only affects borrowers but also has broader implications for housing market activity and, by extension, the economy.”

And Noye also warns that while speculation about rate cuts later in the year may fuel optimism about the housing market, this could yet backfire.

“The path forward is fraught with uncertainty. Fixed-rate mortgages, which have so far benefited from a more competitive environment, may face upward pressure if the anticipated easing of monetary policy does not materialise as expected. This hold in rates marks the first of many decisions this year that will be heavily scrutinised for signs that a drop is on its way.”