Swap Rate Surge Sparks UK Mortgage Rate Hike Fears

UK mortgage borrowers are bracing for higher interest rates due to turmoil in global bond markets. The five-year swap rate, which lenders use to price mortgages, has risen to a three-year high of above 4.52%, with Coventry Building Society becoming the first mainstream lender to increase mortgage rates.

The jump in oil prices and inflation expectations have led investors to sell bonds, pushing up their yield or interest rate. UK swap rates have been pushed up by the rise in gilt yields, which could result in higher fixed-term mortgage rates for borrowers.

Bank of England chief economist Huw Pill has underscored his argument for higher interest rates, saying that waiting for uncertainties to resolve themselves before acting would be a 'wait and see' approach. He believes in taking decisive action to cut through the noise inherent in the current uncertain environment.