Mortgage lenders are raising variable rates for some borrowers following the Bank of England's base rate decision. Financial expert Martin Lewis explained that while the base rate itself hasn't moved, fixed mortgage rates have risen over the last six months due to market sentiment and the ongoing Middle East crisis.
Lewis highlighted that fixed rates are influenced by swap rates, which reflect market expectations of future interest rate changes. The market currently predicts a highly likely quarter of a percent rise in November, with a further 1% increase expected. Chief economist Sebastian Burnside of NatWest confirmed this assessment.
However, Capital Economics offered a dissenting view, suggesting that the market has overpriced the expected rate hikes. They predict only two increases of about half a percent each, followed by a decline. Burnside agreed with this more cautious forecast, noting that the market is pricing in risk rather than making a definitive prediction.
Lewis pointed out a potential paradox: if the base rate rises but not as much as the market expects, fixed rates could actually decrease slightly. Mortgage adviser Kate Fuller confirmed that this scenario is possible.