Some mortgage lenders ‘pause rate cut plans’ amid economic uncertainty

Some lenders have pushed pause on planned mortgage rate cuts, according to a financial information website, amid wider economic and global uncertainties as the conflict in the Middle East unfolds.

Moneyfacts said swap rates, which are used by lenders to price mortgages, have been rising in recent days.

The website said it was aware that some lenders, which it did not name, had already reconsidered planned rate reductions.

Despite some lenders pausing plans to reduce rates further, figures from Moneyfacts indicated some mortgage rates were still heading in a general downward direction on Wednesday.

The average two-year fixed-rate homeowner mortgage rate on the market on Wednesday morning was 4.82%, down from 4.83% on Tuesday.

The average five-year fixed-rate homeowner mortgage rate on the market on Wednesday morning was 4.94%, falling slightly from 4.95% on Tuesday.

In the buy-to-let mortgage market, some average rates edged up.

The average two-year buy-to-let residential mortgage rate on Wednesday was 4.65%, up from 4.64% on Tuesday.

The average five-year buy-to-let residential mortgage rate on Wednesday was 5.05%, up from 5.04% on Tuesday.

Adam French, head of consumer finance at Moneyfacts, said: “Swap rates have been rising sharply as conflict with Iran spreads across the Middle East, driving oil and gas prices higher and reigniting inflation concerns.

“The immediate consequence has been higher gilt yields and a rapid shift in interest rate expectations, with the prospect of a Bank of England base rate cut later this month now looking far less certain.

“For the mortgage market, the impact is almost instantaneous. Some lenders have already paused or reconsidered planned rate reductions.

“Because fixed mortgage pricing is closely linked to swap rates, this sudden market movement risks halting the recent momentum towards lower mortgage rates just as borrower confidence had begun to build ahead of an anticipated rate cut.

“It serves as a stark reminder that mortgage costs are not driven solely by domestic policy decisions.

“Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.”

Martin Temple, an economist at Leeds Building Society, said financial markets “have significantly reassessed” the likelihood of a quarter point cut to the Bank of England’s base rate at its next meeting.

He said the upward movement in swap rates “suggests that rates for customers either re-mortgaging or purchasing a new home are likely to increase in the near-term”.

Mr Temple added: “For savers, however, the current environment may present opportunities, with the potential for more attractive rates as we approach the start of Isa season.”

Jinesh Vohra, chief executive of the app Sprive, said: “Markets have been expecting the Bank of England to cut rates further this year, but renewed geopolitical instability risks may make that path less straightforward.

“If disruption to energy supplies or global supply chains feeds into higher inflation, policymakers may have to be more cautious about how quickly and how far interest rates come down.

“That matters for homeowners, because expectations of falling rates have already been helping mortgage pricing improve. Anything that pushes inflation higher could slow that progress, meaning rates may not fall as much – or as quickly – as borrowers hope.

“For homeowners who feel like they’re financially able, this uncertainty reinforces that making small, optional overpayments when you can is one of the few levers you can control, helping reduce the balance and the impact of future rate moves.”