'Not a great start to the week' as two 'big six' lenders increase mortgage interest rates

Two of the UK’s biggest lenders have started the week by raising mortgage rates, as markets increasingly suggest the Bank of England is unlikely to cut interest rates until August.

Both NatWest and Santander announced mortgage price increases today.

NatWest will raise interest rates by up to 0.21 percentage points on selected new mortgage products and up to 0.22 percentage points on selected remortgage products.

Santander will up rates by up to 0.2 percentage points for new purchases and remortgages.

The increases from both enders will come into effect tomorrow (30 April).

Aaron Strutt, product and communications manager at Mayfair-based broker Trinity Financial said it was “not a great start to the week”.

NatWest also announced new “high value” mortgages, for loans of more than £2 million. It said these mortgage offers, which are likely to mostly apply to homes in London, “enable us to offer a more tailored suite of products to different customer types”.

The rise follows increases from lenders including Barclays and HSBC last week.

It comes as City traders bet against the Bank of England cutting its base rate in June. Markets see only around a one-in-three chance of a June rate cut, with August looking more likely as the date of the first cut.

Matthew Ryan, Head of Market Strategy at financial services firm Ebury, said the first cut could be even later.

He said: ““The significant positive surprise in the April PMI report makes it even less likely that the Bank of England will be able to cut UK rates before September. Britain’s composite PMI jumped to its highest level in almost a year this month and is now well above the level of 50 that denotes expansion.”

That is despite the fact that inflation is widely expected to fall below the Bank’s 2% target when April figures are published next month. The decline is driven mostly by the new energy price cap, as well as extremely high comparative figures for food prices. The Bank’s Monetary Policy Committee feels that the impact of these volatile items means the headline inflation rate does not always fully represent underlying price pressures, and that the battle with inflation is still far from over.

According to personal finance information site Moneyfacts, the average two-year fixed residential mortgage rate today is 5.87% and the average five-year fix is 5.44%. Both of those rates are the same as on Friday.