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First high street bank raises mortgage rates after election call

high street banks
high street banks

Barclays has become the first high street bank to raise mortgage rates after Prime Minister Rishi Sunak announced a June election.

Britain’s biggest mortgage lender announced a 5.8pc increase on three-year fixes, and said those remortgaging would pay an additional 0.25pc from Friday.

Swap rates – the main pricing mechanism for fixed rate mortgages – rose sharply from 4.52pc to 4.69pc after the Prime Minister announced an early summer election on Wednesday.

British markets are now not pricing in a Bank Rate cut until September – a two month delay on previous forecasts – with a second cut expected in the spring of 2025.


This is despite inflation falling to a three-year low of 2.3pc, close to the Bank of England’s 2pc target.

Mr Sunak said that the fall in the Office of National Statistics headline rate meant the Tories’ “plan is working”.

Barclays said a three-year fix would increase by 5.8pc to 4.57pc and its remortgaging offers would rise by up to 0.25 percentage points.

On the bank’s two-year fixes for purchases and remortgages of above £2m, the interest rates on offer will rise by up to 0.3 percentage points, with a two-year fix with a 75pc Loan-To-Value (LTV) increasing to 5.05pc.

Barclays cut its mortgage rates last week, alongside TSB and HSBC, but its decision puts its offerings above those of its close competitors.

Other major lenders, including Santander, announced that their mortgage rates would be cut.

Santander will drop its five-year fix on a 60pc LTV from 4.5pc to 4.42pc, whereas its three-year fixes will see drops of up to 0.26pc from Friday.

In a boost for prospective landlords, the bank’s buy-to-let rates will be cut by up to 0.2pc, with a two-year fix on a 75pc LTV to be priced at 4.96pc.

TSB will also cut rates from Friday. Its rates for first time buyers will drop by up to 0.40pc, and it will reintroduce two-year trackers for both new and existing mortgage customers.

Halifax is also among lenders who have announced cuts since the inflation data was released on Wednesday.

The Bank of England has held the Bank Rate at 5.25pc since last August, following 14 consecutive rises from December 2021.

The next meeting of the independent committee will be held on June 20, two weeks to the day before the election.

Simon Wells, chief European economist at HSBC, said: “June was always going to be a close call…But while the more hawkish members stopped voting for rate rises, they were never likely to vote for a cut soon.”

Mr Wells added: “It now seems more likely than not that the first UK rate cut will come in August – after the European Central Bank (where we still expect June) but before the Fed (where we forecast September).”

Rob Gill, of broker Altura Mortgage Finance, said: “These rate hikes from Barclays are no surprise after yesterday’s disappointing inflation figure. The surprise is that other lenders cut rates just hours after interest rate markets slashed the chance of a June base rate cut.”

Mr Gill added: “Borrowers and brokers alike will watch closely to see how this tug-of-war plays out.”

Other brokers said that they hoped to see a U-turn from Barclays in coming weeks. The lender had had the lowest rates on the market.

Ross Lacey, of financial adviser Fairview Financial Management, said: “We’d hope, given the direction of travel, to see further rate cuts from other lenders and for a U-turn on this from Barclays in the coming weeks.”