The news arrives as average rates for two- and five-year mortgages begin to rise.
For the first time in three months, the average rates for the two most popular loan terms have gone up.
The average rate for a two-year mortgage increased from 5.36% to 5.37% since last Friday, while five-year fixed rates saw a slight rise from 5.05% to 5.06%, according to Moneyfacts data.
Although the changes are small, they mark an end to the recent trend of declining rates seen over the past few months.
The last time both types of mortgage rates increased was in early July, when two-year rates rose from 5.92% to 5.93% and five-year rates edged up from 5.50% to 5.51%.
In the past week, major lenders like Santander have withdrawn their most competitive mortgage deals, following a rise in swap rates, which heavily influence the rates lenders offer. Now, another major lender has followed suit, stepping back from further rate cuts.
NatWest has become the latest major bank to raise its mortgage rates, raising concerns that the recent trend of declining home loan rates may be coming to an end. The bank announced that, starting Thursday, most of its two-year and five-year fixed and tracker mortgage products will see an interest rate increase of 0.3%.
For its key five-year fixed mortgage for buyers with a 40% deposit, the rate will jump from 3.79% to 4.09% — just over the psychologically important 4% barrier. Borrowers with a 25% deposit will also face an increase, with the rate on their five-year fix rising from 3.89% to 4.19%. Additionally, some tracker mortgages will go up, including a two-year option for those with a 40% deposit, which will rise from 5.61% to 5.91%.
This sharp reversal in mortgage pricing comes after months of declining rates and is driven by rising yields on government bonds (gilts), which impact fixed-rate mortgage pricing. Today, the yield on the 10-year gilt reached 4.242%, up about half a percentage point since mid-September. This increase reflects concerns in the bond market over a possible rise in government borrowing in the upcoming budget, which, although unlikely, could heighten investor fears about repayment risks.
The property market had been showing signs of recovery as mortgage rates eased, with sub-4% deals becoming more common. Despite the recent rate hikes, the Bank of England is still expected to lower its base interest rate from 5% to 4.75% at its next Monetary Policy Committee meeting in November.