A sharp repricing of expectations for further increases in bank rates has already pushed swap rates higher, which is now feeding directly into mortgage prices.
The latest SONIA swap rate clearly shows this movement, with two-year cash at 4.483%, three-year at 4.420% and five-year at 4.346%.
That matters for mortgages because lenders discount fixed interest rates from future financing costs, not just where bank rates are today.
Coventry has for intermediaries attracted all new residential and buy-to-let deals for new customers and are yet to relaunch, while Aldermore, Metro, Gen H, TSB, Nottingham, Leeds, Shawbrook and Principality have all increased their fares, withdrawn products or repriced parts of their ranges.
That’s usually the clearest sign that higher financing costs are starting to take hold.
The immediate effect will likely be further upward pressure on fixed mortgage rates, along with increased drawdowns in the near term, as lenders try to keep pace with the fast-moving markets.
Mortgage pricing doesn’t wait for the Bank of England to come to fruition. If markets continue to price in higher rates from here on out, lenders will likely continue to raise their upfront prices.
There are understandable comparisons with the post-Liz Truss mini-budget volatility, as the pattern of rapid withdrawals and repricing feels familiar.
But the cause is different. In 2022, the shock came from domestic budgetary credibility.
This time the pressure comes from a sharp shift in interest rate expectations, higher swap prices and concerns that policy may have to remain tighter for longer.
That does not automatically mean a return to those peak interest rates, but it does increase the risk of further upward movements in the short term.
For borrowers, the message is not to sit back and hope. Anyone buying anything should consult a real estate agent early, because lenders can move quickly and the best options don’t always last long.
For those remortgaging, it is even more important. In most cases, a new rate can be locked in three to six months before the end of an existing deal.
If interest rates improve before closing, there is often room to move to something lower, saving you a significant amount over the life of the mortgage. Waiting and hoping is not a strategy in a market like this.
Nicholas Mendes is mortgage technical manager at John Charcol.