Mortgage rates set to raise (again) following the budget
Banks and building societies are set to increase their most competitively priced mortgage rates again following Chancellor Rachel Reeves' first budget.
Some mortgage lenders reversed previous price hikes in the run-up to the budget, but rates are set to rise following mortgage funding cost increases. Coventry Building Society, Precise, TSB and some specialist buy-to-let lenders were the first to increase prices.
Gilt* and swap rates** have recently increased, and some lenders have already said this will have a knock-on effect on mortgage rates. One buy-to-let lender announced earlier that it is pulling some of its rates due to volatility in the pricing markets. There have been some product withdrawals and rate increases. It would not be a shock if most of the remaining sub-4% rates were withdrawn soon until the money markets calm down.
Aaron Strutt, product director at Trinity Financial, says: "If you are in the process of applying for a mortgage, it makes sense to secure a rate now. You can monitor the market and try to swap to cheaper deals if they are available before you complete your purchase or remortgage.
In a normal market, mortgage rates go up and down—this is something that is going to happen more frequently than many particularly younger borrowers have been used to."
Market focus is now very much on next week’s US election, which remains too close to call and will be pivotal to the dollar, with a Trump win likely leading to a stronger currency. The Bank of England and US Federal Reserve also meet next week with a 0.25% rate cut expected from each.
Stamp duty changes
According to the Nationwide Building Society, home sales are expected to "jump" at the beginning of next year as people try to buy before the rise in stamp duty. From March 2025, changes introduced in Wednesday's Budget mean many will pay the tax when they would not have previously.
Meanwhile, changes to stamp duty for buy-to-let landlords and second-home buyers announced in the Budget came into effect on Thursday, with the additional tax they face rising from 3% to 5%.
*A gilt is a UK Government liability denominated in sterling, issued by HM Treasury and listed on the London Stock Exchange. **Swap rates, also known as interest rate swaps, allow two parties to exchange interest rate cash flows over a specified period. In the context of mortgages, banks and lenders use interest rate swaps to manage their own exposure to interest rate fluctuations.
Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
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