HSBC hit homebuyers with a 0.5 percentage point increase in mortgage rates on Thursday – double the size of the Bank of England’s interest rate rise.
The high street bank raised its rates by as much as half a point shortly before the Bank increased the benchmark cost of borrowing by a quarter-point to 1.25pc, the highest level since the financial crisis.
All of HSBC’s fixed-rate deals rose by 0.45 or 0.5 percentage points, the third time in 10 days the bank has altered its rates.
It pressed ahead with the chunky increase, its largest in at least a year, despite a consensus – supported by HSBC’s own economics team – that the Bank would only raise rates 0.25 percentage points.
The daily shift was also roughly double its competitors’ increases on the same day.
An HSBC spokesman said the increase “was not in anticipation of the Bank of England Base Rate decision.”
“We regularly review our mortgage rates, and there are a number of different factors taken into account,” they said.
“There continues to be volatility in funding rate costs, which has led to an upward trend in rates, and on this occasion following our review, some of our rates are increasing by up to 0.5pc.”
Standard variable rate mortgages are currently at their highest level for more than 13 years. The average standard variable mortgage is now 4.91pc, the highest since February 2009 when the average rate was 4.94pc, according to analyst Moneyfacts.
Rachel Springall from Moneyfacts said: “HSBC are moving in the same direction as many other large lenders, and that is up.”
The Bank of England’s interest rate decision was broadly in line with expectations, although a six to three split between policymakers over a possible larger hike gave the outcome a hawkish tilt.
The pressure on Threadneedle Street had been cranked up a notch after the US Federal Reserve, the world’s most powerful central bank, raised interest rates 0.75 percentage points on Wednesday, which was the biggest move in 28 years.
Ms Springall said HSBC’s mortgage rate increase would likely have been in train for several days, so was unlikely to be a reaction to the Fed.
“I would be very surprised if a lender would move to reprice [fixed-rate mortgages] that quickly in the UK,” she said.
Ahead of the Bank’s decision, NatWest chair Sir Howard Davies said the Fed decision had “upped the ante” on the MPC and made a half-point increase “the favourite outcome” for Thursday’s meeting.
Investors now expect the Bank to undertake a series of ‘double’ rate rises in the coming months, with markets pricing in three 0.5 percentage point increases by November’s meeting, followed by quarter-point steps in December and February.
Collectively, those increases would take the Bank Rate to 3.25pc – the highest since 2008, in the midst of the emergency cuts undertaken to keep the UK economy going during the financial crisis.
In total, 10 lenders announced mortgage rate increases ahead of the Bank announcement at noon yesterday (Thurs).
NatWest increased the majority of its fixed-rate mortgages by as much as 0.27 percentage points and Santander said from the beginning of July all tracker mortgage deals linked to the Bank Rate will increase by 0.25 percentage points.
Mortgage brokers said they were braced for a “constant stream of rate rise” in the coming days, as expectations build that the Bank of England will accelerate its monetary tightening in the coming months.