Borrowers warned of ‘mortgage storm’ ahead of Budget

Mortgage rates have risen for the first time in three months as nervous lenders prepare for Labour’s “painful” Budget. 

Borrowers are being urged to lock in their mortgage deals now as rates are expected to keep climbing after months of falling.

Both NatWest and Santander increased the interest rates on their fixed-rate mortgages as brokers warned more lenders will follow suit. 

It comes as swap rates – the main pricing mechanism for home loans – rose over the past few weeks driven by concerns over potential increases in government borrowing.

From Wednesday, NatWest will raise rates across its two-year and five-year fixed loans by 0.3pc. A five-year fixed rate for buyers with a 40pc deposit or equity will rise from 3.79pc to 4.09pc. 

Meanwhile, Santander has increased some of its fixed mortgage rates by up to 0.22pc.  

Figures from analysts at Moneyfacts show the average rate on a home loan increased for the first time in three months.

The average two-year fixed residential mortgage rate rose to 5.37pc from 5.36pc on Friday, while the five-year fixed rate average rose to 5.06pc from 5.05pc.  

Broker Justin Moy, of EHF Mortgages, said: “Expectations of how the market will react to the ‘painful’ Labour Budget that is looming, coupled with nervousness around world oil prices increasing, makes for a tough narrative at the moment, and shows how sensitive our economy has become. 

“Borrowers need to work swiftly and secure deals as soon as possible, just in case this trend becomes longer than originally planned.”

Ken James, director at Contractor Mortgage Services, said: “Batten down the hatches as the rate storm starts to rage. It is no surprise that a big lender has started increasing rates, with the cost of lending rising not just for mortgage customers but for the banks as well.”