Rachel Reeves’ budget pushes up mortgage costs
Financing the Government’s Budget plans is pushing up the cost of borrowing for everyone including mortgage holders.
The scale of Rachel Reeves’ borrowing in the Budget has pushed up the cost of finance and many of the UK’s biggest lenders including NatWest, Barclays and Nationwide, Santander, HSBC and Virgin Money are already raising rates on their fixed price mortgages.
Mortgage rates had been falling but In the aftermath of the Budget, gilt yields and swap rates (the rate at which banks base their mortgage prices) rose sharply, forcing lenders to act, with many adding around 0.35% to their deals.
At the same time, Reeves’ increase in the minimum wage and employers’ National Insurance contributions are likely to put upward pressure on inflation (and the base rate), which had only just dropped below the Bank of England’s 2% target.
The delayed ripple effects from the Budget seem to be trickling through now.”
Michelle Lawson, of broker Lawson Financial, told the Telegraph: “The delayed ripple effects from the Budget seem to be trickling through now. This appears to be a spectacular own-goal from Labour.”
According to analysis by the Office for Budget Responsibility the best mortgage rates will go up from 3.7% to 4.5% in 2027.
Knight Frank Finance partner Hina Bhudia said: “It often takes one large lender to prompt a broader shift in mortgage pricing and announcements of rate hikes are now coming thick and fast.
Recovery is on pause
“The moves we’re seeing aren’t small either – often about 0.3%, which will be enough to suppress housing market activity as we move towards the end of the year.
“We’ll need a real and enduring change in the inflation outlook for mortgage rates to begin falling again, which means the recovery is on pause for now.”
That photo of Reeves is her laughing at all those non-union members who voted for them and the rest that didn’t.