UK mortgage rates set for increase after swap rates hit three-year high above 4.52%
Global bond market turmoil and oil price fears drove UK five-year swap rates to a three-year peak, prompting Coventry Building Society to raise fixed-term rates.
Homeowners in the United Kingdom are preparing for higher mortgage rates as global financial markets experienced significant instability. The five-year swap rate, which serves as a benchmark for lending costs, climbed above 4.52% on Wednesday. This marks the highest level since October 2023. Rising oil prices following tensions between the United States and Iran contributed to inflation fears and triggered a sell-off in bonds, pushing yields higher. Consequently, UK government bond moves were more pronounced than similar shifts elsewhere globally. Coventry Building Society became the first major lender to adjust its rates across all fixed-term mortgage categories for new and existing customers, including buy-to-let borrowers. While fixed-year rates remained unchanged on Thursday, analysts warn that increased swap costs from banks borrowing from one another pose serious risks to borrowers. Russ Mould, investment director at AJ Bell, noted these developments within the trading platform.
