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Interest rates on some of the most competitive high street mortgage deals have risen in a fresh blow to homeowners and buyers.
HSBC and Halifax are among the lenders that have raised rates on some of their deals amid a “fraught political and economic climate”, with more expected to follow suit. One expert has urged buyers to “grab” any sub-4 per cent deals before they disappear entirely.
It will be seen as a fresh blow to Labour as the government hopes to improve consumer confidence and boost the UK economy ahead of Rachel Reeves’ Budget. The chancellor has vowed to deliver a statement on November 26 which addresses an economy that’s “not working well enough for working people”.
Adam Stiles from Helix Financial said: “HSBC have followed a long line of other lenders who have increased rates over the past week or so. This could be possibly in anticipation of the upcoming Doom Budget, as well as a number of other economic factors.
“We expect to see other lenders continue to raise their rates for the time being in what is a fraught political and economic climate.”
Louis Mason from Oportfolio Mortgages added: “Don’t wait. Act now. If your current deal ends in the next 6 months, your number one job is to secure a new rate today. You can always switch to a cheaper deal later if rates miraculously fall, but you can’t get back a cheap rate that’s gone.
“This isn’t about timing the market, it’s about protecting yourself from it. Lock in a rate you can afford to get that certainty. Speak to a broker now. Every day you wait could cost you.”
Interest rates have been on a downward course for much of 2025 but, with inflation still remaining high around 4 per cent, scope for the Bank of England to make further cuts is diminished. That, in turn, sees swap rates edging higher – which mortgage products are based on.
Almost a quarter of a million people are expected to need to renew five-year deals they initially took out just after Covid, when interest rates were rock bottom. They now face a huge uptick in monthly repayments, with no expectation of incoming mortgage rate cuts.
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Peter Stimson, director of mortgages at MPowered, told The Independent: “Not all remortgages will be created equal in the coming months. Borrowers who took out a two-year fixed rate mortgage in 2023 are likely to see their interest rate go down, and a welcome reduction in their monthly repayments.
“But for the 200,000 or so people coming to the end of a five-year fixed rate, remortgaging will be a more bitter pill. Covid-era interest rates were much lower than they are now, so some of these borrowers could see their monthly repayments jump by hundreds of pounds.”
He urged homeowners to snap up any good deals now, because they are unlikely to last.
“Remortgagers tend to own a chunk of equity in their homes, which can help them qualify for the most attractive rates. Many of those remortgaging over the coming months could get a fixed interest rate below 4 per cent, irrespective of whether they want to fix for two, three or five years.
“But there’s a caveat to the good news – the interest rates on fixed-rate mortgages have probably fallen as far as they can. In fact some rates even inched up in recent weeks, as some lenders conceded that they may have got ahead of themselves in the frenzy of rate-cutting.
“Much as we might dream of a return to the days of sub-2 per cent mortgage interest rates, that simply isn’t going to happen. If you get offered a rate of under 4 per cent in the current market, grab it.”
His warning comes as new data from Incomes Data Research shows that average pay growth in the UK dropped to 3 per cent – down from 3.4 per cent – between April and July, marking the slowest pace since late 2021.
Wage growth – just like interest rates affecting both mortgages and savings – can work as two sides of the same see-saw. It can contribute to the overall difficulty in extra spending, including a malaise in house-buying when widespread. But it is also an important measure of future possible inflation – meaning earnings are less likely to contribute to rising inflation further down the line.
Meanwhile, financial expert Rachel Springall from Moneyfacts pointed out that the increased choice on high loan to value (LTV) products – those that give you 90 or 95 per cent of the property value for the mortgage amount – is higher than it has been for almost two decades.
That is a plus for first-time buyers, who remain in a battle amid rising property prices nationally to get on the ladder at all.
“The government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive,” said Ms Springall. “However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins.
“Overall, it does not bode well for borrowers who were hoping for a rate war, but it is worth pointing out that economic unrest typically leads to rising swap rates, which forewarn lenders. As we have seen countless times, lenders can adopt a more cautious approach to pricing their mortgages when swap rates rise.
“First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder.
“Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”
Property market data was mixed recently, with Nationwide figures showing a small drop in the average price of a home in the UK across August. Halifax data showed it rose to record levels, just shy of £300,000.
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