A slew of lenders have decided to increase mortgage rates, triggered by the expectation that the Budget will lead to higher inflation. 

At the end of last week Barclays, Coventry Building Society, HSBC, Nationwide, Santander, TSB and Virgin Money were amongst those to increase rates, despite the recent Bank of England base rate drop.

Several mortgage deals have also been pulled off the market 

Nicholas Mendes, mortgage technical manager at John Charcol, says: “While many lenders have opted to maintain their existing rates to preserve business volumes and service standards, those offering competitive pricing have been forced to adjust, likely due to applications levels. These influxes often stretch service levels, prompting rapid rate changes to manage demand effectively.

“Adding to the pressure, swap rates – key indicators used by lenders to price fixed-rate mortgages – have edged upward, further necessitating these adjustments. The combination of market dynamics and rising swap rates highlights the difficult landscape borrowers are navigating.”

Brokers say the outlook has changed for lenders with the BoE warning future base rate falls may be slower than expected. 

“The slew of rate changes in recent weeks has continued to push [mortgage] rates higher, reflecting the higher costs for lenders, as the market outlook for rates has edged toward a ‘higher for longer’ expectation” comments David Hollingworth of L&C.

“Unwelcome as it is for borrowers, it’s important to note that there’s no sign of rates skyrocketing as they have in recent years. The Bank of England base rate is still expected to fall over time, but markets are questioning if the pace will be as rapid.”

Bank governor Andrew Bailey says rates are likely to “continue to fall gradually from here”, but warns they could not be cut “too quickly or by too much”.