NatWest Group PLC (LSE:NWG) will increase mortgage rates for existing borrowers on two and five-year deals by 0.1% from tomorrow, Sky’s Money Blog has reported.
Fellow lenders Banco Santander (LSE:BNC) and The Co-operative Bank are also poised to raise their rates on the back of rising swap rates that have impacted lenders’ own borrowing costs.
Lenders began raising mortgage rates this year as the prospect of a higher-for-longer interest rate policy from the Bank of England started to look likely.
Up to 1.6 million households are due to remortgage this year, and many of them will be facing a drastic increase in monthly repayments as they come off sub-2% two and five-year mortgages.
The Office for Budget Responsibility predicted earlier this month that average mortgage rates will peak at 4.2% in 2027, up from a low of 2% at the end of 2021 and above the average mortgage interest rate of around 3% in the 2010s.
On the bright side, this prediction is 0.8 percentage points lower than the OBR’s forecast published in November.
Average house prices are expected to start a recovery phase from the fourth quarter of 2024.
“Supported by falling new mortgage rates, we then expect house prices to grow around 2% in 2026, and around 3.5% in 2027 and 2028,” said OBR analysts. “That would see nominal house prices surpass their historical peak in the first quarter of 2027.”
