Mortgage warning as building society hikes rates and more lenders tipped to follow

Coventry Building Society has announced increases to its fixed rate home loans amid fears the Bank of England will delay cuts in the base rate.

Brokers say this is likely to be the first of a number of increases by lenders amid continuing volatility in the mortgage market.

Figures from the Office for National Statistics (ONS) today revealed a lower than hoped for fall in inflation – down from 3.4 percent to 3.2 percent.

As a result, City analysts are suggesting the Bank of England’s Monetary Policy Committee (MPC) will delay cutting the base rate from the current figure of 5.25 percent.

Against that background, the Coventry Building Society has decided to raise the interest rates it charges on new fixed rate home loans.

Justin Moy, Managing Director at EHF Mortgages, told Newspage: "This is disappointing news.”

He said banks and building societies have no choice but to pass on increases in so-called swap rates, which set the rate at which financial institutions borrow money to lend to consumers.

Mr Moy said the decision by the Coventry “is just the start of another major ripple of increases that will only disappoint those coming off cheaper deals and looking to buy”.

James Bull, Mortgage Broker at JB Mortgages, said: “It is always sad to see a lender increasing its rates and bad news for borrowers. Volatility in the mortgage market is showing no signs of slowing down."

Director at Lawson Financial, Michelle Lawson, said: "No surprises here following this morning’s inflation decrease as it wasn't as low as markets expected. More than anything we need stability but the mixed messages being sent out to borrowers remain. This appears to be the new ‘norm’ for now."

Peter Stokes, Director of Mortgages at Davidson Deem, said: "Over the past week or so, swap rates have been steadily increasing, partly due to inflation figures from across the Atlantic as well as increasing tensions in the Middle East.

“Inflation in the UK, though falling, fell less than expected in March, and these hikes from the Coventry suggest this is already starting to filter through to higher fixed rates from lenders.

“If your rate is coming up for renewal, it might be better to act sooner rather than later to get the very best deal."

Amit Patel, Adviser at Trinity Finance, warned: “I anticipate other lenders will announce modest rate increases over the coming days, perhaps to do with the lower than expected falling inflation."