One week on from base rate: How has the mortgage market reacted?

While variable rates saw increases, fixed rates reduced.

Last week the Bank of England’s Monetary Policy Committee voted to increase the base rate to 3.00%. It meant the base rate rose by 75 basis points, the highest single increase in over three decades.

Since then, mortgage lenders have passed on this exact rise to several of their variable rates.

According to Moneyfacts data, the average two year tracker rate stood at 3.69% on the day of the base rate increase. The very next day this figure increased to 3.85%.

This figure has continued to rise, standing at 4.12% today.

Meanwhile, average fixed rate deals have moved in the opposite direction.

The average two and five year rate stood at 6.46% and 6.30% respectively on the day of base rate change. Since then, the average two year fixed rate has dropped 0.11 percentage points while the average five year fixed rate has seen a 0.18 percentage point drop.

Compared to variable rates, fixed rates are not as sensitive to the Bank of England’s base rate. Ultimately other variables, such as swap rates and gilt yields, play a role in the pricing structure for these types of mortgages.

This might be why average variable rates have moved differently to average fixed rate mortgages in the past seven days.

Below we have listed the change in mortgage rates by some of the UK’s best-known mortgage lenders since the base rate decision.

Both HSBC and first direct increased variable tracker mortgages by 0.75 percentage points.

HSBC made this increase on Friday while its retail banking division, first direct, did so a day earlier on the day of the base rate rise.

HSBC did reduce some of its fixed rate mortgages by up to 0.29 percentage points on the day of the base rate rise while first direct reduced the rate on its five and 10 year fixed rates on Tuesday.

In addition to reducing some of its rates, HSBC added a £500 cashback incentive to the majority of its Fee Saver mortgages.

Meanwhile Halifax, which is the UK’s largest mortgage lender, reduced a variety of its fixed rates on Monday. The most intensive decrease saw some of its rates drop by 0.24 percentage points.

Lloyds Bank made similar reductions to its fixed rate mortgages on Monday while the Royal Bank of Scotland reduced some of its fixed rates by 75 basis points today.

Virgin Money increased its Standard Variable Rate by 0.50 percentage points on Friday, meaning it now sits at 6.49%.

Yesterday it reduced an array of its fixed mortgages by 45 basis points, with some of these deals mentioned in this week’s roundup.

Last Thursday Barclays Mortgage increased its Variable Tracker Rate and Revert Rate in line with the base rate increase.

Today, it made changes to its fixed rate range, reducing some of these mortgages by 0.40 percentage points at most.  

Nationwide BS increased its Standard Mortgage Rate (SMR) and Tracker Rates by 0.75 percentage points on Tuesday.

This increase may be of interest to those coming to the end of their initial agreement with Nationwide BS as they will either revert to an SMR or a Base Mortgage Rate (BMR). 

While both variable rates were included in the latest increase, they hold different risks. The BMR will never be more than 2% of the Bank of England’s base rate while the SMR has no limit.

The SMR currently sits at 6.49% while the BMR is lower at 5%.

Instead of making an instant increase, Yorkshire Building Society withdrew its Variable Tracker Mortgages last Thursday evening. This Tuesday they were back on the market with new rates.

During this decision its Standard Variable Rate and Revert Rate increased by half a percent on Sunday to 5.89% and 4.70% respectively.

For its fixed rates, these largely reduced by at most 0.38 percentage points.

NatWest and NatWest Int Sols today reduced all of its fixed rates by 0.75 percentage points at most.

NatWest Int Sols, which only offers its mortgages through intermediaries, reduced its tracker mortgages by 0.29 percentage points at most.

Santander increased both its Standard Variable Rate and Variable Tracker Rate by 75 basis points today to be in line with base rate.