Mortgage customers urged to act now as UK swap rates surge | Personal Finance | Finance

Brokers have urged borrowers to “get their skates on” and lock into a rate if they’re currently looking to take out a mortgage, or are remortgaging in the months ahead, as rising swap rates, which are used to price fixed-rate mortgages, could soon see recent price reductions go into reverse.

Lenders have been consistently slashing rates over recent weeks, partly to breathe life into the market following a subdued spring, and also in response to easing tensions in the Middle East. On Monday, Nationwide, Santander, Virgin and NatWest all announced rate cuts.

However, experts have cautioned that hardened rhetoric from Trump, combined with soaring gilt yields driven by political turmoil following the local elections and mounting pressure on Starmer’s leadership, could bring the run of rate reductions to an abrupt halt within days.

Wesley Davidson, director of Bristol-based FD Commercial, said earlier this week: “Swaps are climbing for three reasons that reinforce each other. UK political risk has returned after Labour’s local election losses and the calls for Starmer to go, pushing 10-year gilts above 5.1%, their highest since 2008.

“Brent is back above $105 as the Iran situation drags on, feeding UK inflation through fuel and transport. On top of that, the Bank of England’s Monetary Policy Committee has turned hawkish, with markets pricing two or three rate hikes by year-end rather than the cuts we were discussing in February.

“If swaps keep rising at this pace, recent fixed-rate cuts will stall within days and reverse within weeks. Lenders cannot absorb 20 to 30 basis points of funding cost without repricing.

“My advice to borrowers is simple: if you are remortgaging in the next six months, secure a rate now. If pricing improves before you complete, you can switch to the better deal.

“If it gets worse, you are protected. The next major test is the inflation print on May 21. If it comes in high, the next move is a hike.”

Gaurav Shukla, CEO of Marlow-based Home Me Mortgages, said: “If swaps continue rising, lenders are likely to slow rate reductions and some may reprice upwards again, especially with their fixed rates. We’ve already seen how quickly pricing can change when markets become uncertain.

“For borrowers, timing the market perfectly is difficult. The focus should be on securing a deal that works for your budget and long-term plans rather than waiting for the ‘perfect’ rate. We are still seeing some strong options available to borrowers, but hesitation can sometimes cost more if rates move against you.”

Harry Goodliffe, director of Winchester-based HTG Mortgages, added: “The markets seem very nervous about stubborn inflation and government turmoil and, if swaps keep climbing, we could quickly see recent rate reductions disappear. For borrowers, holding out for dramatically cheaper deals feels like a gamble right now. Locking in some certainty may be the safer call.”

Justin Moy, managing director of Chelmsford-based EHF Mortgages, warned borrowers to protect themselves against another potential wave of rate rises.

He said: “While the Middle East conflict continues to cast a dark shadow over the UK economy, acute political unrest within government is heaping another layer of uneasiness on the market, which takes the cost of finance just that bit higher. The lack of clarity about the future makes the markets rightly nervous and, ultimately, we, as the borrowing public, pay for that in our pockets. It’s time to get your skates on and get the new mortgage booked before another wave of rate increases ultimately hits the fan.”

Emma Jones, managing director of Runcorn-based Whenthebanksaysno.co.uk, agreed turmoil in Number 10 is adding to wider market nerves around the Middle East.

She said: “Escalating tensions between the US and Iran and the continued impact of the conflict on oil prices are fuelling inflation fears, and when markets are worried about inflation, swap rates rise. The domestic political situation is also pouring fuel onto the fire, adding to market nerves. If swaps continue to rise, the rate reductions we’ve enjoyed in recent weeks could soon go into reverse. Borrowers need to have this on their radars.”