Skipton Building Society to increase mortgage rates in 'baffling' move
Mortgage rates could edge downwards in the coming weeks, though brokers say not to expect cuts 'overnight'
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Skipton Building Society has announced increases across selected mortgage rates from next week, despite growing speculation interest rates will be cut within months.
The announcement has come as a shock to many mortgage experts following the Bank of England’s decision to keep interest rates at 5.25 percent yesterday.
The building society will withdraw its five-year fixed rate purchase only products, as well as increase the rates on other deals.
These changes will take place on March 26.
Hannah Bashford, director at Model Financial Solutions said the decision was “baffling” as interest rates are predicted to fall later this year.
She added: “With a positive base rate decision meeting yesterday and expectations for rates to decrease by the summer, we’ve seen swaps reduce and yet lenders are increasing their rates.
Skipton Building Society has announced increases across selected mortgage rates from next week
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“Why? They can’t all be claiming to stem business volumes when March has been much slower in terms of applications than January and February.”
Matthew Jackson, director at Mint FS explained the decision to cut rates could purely be to slow down service during the day.
“Namely Skipton needing to slow down applications to keep service levels high,” he said.
Alternatively, Stephen Perkins, managing director at Yellow Brick Mortgages, said Skipton could be trying to increase its margins.
He told Newspage: "Skipton have either made these rate decisions in a dark room isolated from the news cycle, or are trying to increase their margins or reduce their application levels.”
Michelle Lawson, director at Lawson Financial said: “A surprising Spring bounce upwards for the Skipton after a hold on the base rate yesterday and swap rates coming down. Hopefully this is the rise before the fall.”
Many brokers and lenders are anticipating rate drops, especially after the latest inflation rate was revealed to have eased to 3.4 per cent in the year to February 2024.
Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said the combination of lower than expected inflation figures and the BoE’s decision to hold rates firm — amid optimistic comments from the Bank — had added “stability” to the mortgage market.
The current average mortgage rate for a five-year fixed rate mortgage is 4.85 per cent, up from 4.84 per cent last week, according to RightMove.
The current average rate for a two-year fixed rate mortgage is 5.23 per cent, up from 5.22 per cent last week.
The lowest available five-year fixed rate is 4.13 per cent, and the lowest available two-year fixed rate is 4.46 per cent – both unchanged from last week.
The financial markets are predicting that the Base Rate is at its peak.
It’s thought interest rates will remain flat into 2024, before starting to come down.
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But financial commentators are expecting mortgage products to start to take on some of these reductions.
With the expectation that the Bank will cut rates, many borrowers are opting for shorter term fixes, brokers have said.
Adrian Anderson, director at broker Anderson Harris, said two-year fixes would allow more flexibility over the coming months.
Rates on two-year deals are considerably lower than tracker rates. Five-year rates are marginally, though not “meaningfully”, lower, he said.
He added: “That’s why most people are opting for two-year fixes.”