Major lenders raise mortgage rates ahead of Reeves's spending review
Two major lenders have raised mortgage rates amid fears Rachel Reeves's spending spree will slow down interest rate cuts.
Barclays has announced rate rises of around 0.1 and 0.15 percentage points across a range of fixed-rate deals right after HSBC announced similar increases.
It comes as the Chancellor prepares to publish her £300bn spending review today, having already set out an £87bn increase in public spending over the next two years.
Experts said it could spell pain ahead for mortgage borrowers, as economists warn Reeves had reduced the chances of a rate cut this year.
Barclays increased the rate on its five-year fixed-rate deal for those remortgaging with a 60pc loan-to-value ratio from 3.86pc to 4.03pc, leading some brokers to declare the end of sub-4 pc deals.
Five-year swaps are currently at 3.71pc up from around 3.6pc a few weeks ago due to a number of factors including uncertainty around US trade policy.
The Bank of England cut rates from 4.5pc to 4.25pc in May, but a rate cut in June looks unlikely after data revealed higher-than-expected inflation.
Adrian Anderson, of broker Anderson Harris, said: 'I'm not surprised some lenders have increased rates because the cost of borrowing has increased slightly.
'Markets will be looking closely at the spending review. Rachel Reeves needs to strike a delicate balance between not upsetting the bond market while also not upsetting voters. If it looks like she is going to have to borrow more, that will impact swap rates.'
Nicholas Mendes, of broker John Charcol, said: 'Looking further afield, mortgage rate cuts are likely to slow. Much of the expected base rate movement from the Bank of England has already been priced in, so unless we see a sharp shift in swap rates or economic data, there's limited room for significant reductions.
'If anything, we could be in for a period of relative stability – a bit of sideways movement rather than any dramatic repricing.'
Harry Goodliffe, of broker HTG Mortgages, said: ' We're definitely seeing the sub-4pc deals slip away, and fast. Barclays and HSBC hiking rates feels like a mix of reacting to rising funding costs and not wanting to be overwhelmed with demand. No lender wants to be too competitive in a market this uncertain.'
However, other lenders have moved in the opposite direction, with NatWest cutting rates by up to 0.23 percentage points.
Aaron Strutt, of broker Trinity Financial said: 'Some borrowers still believe we are in a rate-cutting environment where mortgages are getting cheaper, but this is generally not the case.'
He added: 'While the cost of funding does seem to have stabilised, it would not be a surprise to see more lenders pushing up their prices over the coming days.'
According to financial data provider Moneyfacts, the average rate on a two-year fix fell 0.06pc to 5.12pc last month, compared to a 0.14pc drop a month prior, in a sign that the mortgage price war we saw earlier this year is cooling off.
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