HSBC and Coventry raise rates on fixed mortgages amid Middle East crisis

HSBC, Nationwide and Coventry building societies are the first big UK lenders to announce an increase in rates on their fixed mortgage deals as a result of the Middle East crisis, with brokers predicting others are likely to follow.Experts have said the war could trigger an energy price shock that pushes up UK inflation, which may in turn force the Bank of England to increase interest rates.That uncertainty has affected the money market swap rates that lenders use to decide the rates on their new fixed mortgages. Aaron Strutt at the broker Trinity Financial said these were the first large lenders to announce rate hikes “based on the funding cost increases brought on by the chaos in the Middle East”.“It seems almost certain we are going to see a lot more rate changes over the coming days, so if you are on the hunt for a mortgage, it is worth locking into a new deal now,” he said.HSBC said it would be increasing rates on a large number of its residential and buy-to-let mortgage deals with effect from Friday, although at the time of writing the new pricing was not available.Nationwide said it was increasing selected fixed rates by up to 0.25 percentage points from Friday.Coventry said its new rates would take effect from Monday. It said it would be increasing all fixed rates for new and existing borrowers.The warnings of higher mortgage costs deal a blow to homebuyers and those looking to remortgage. About 1.8m fixed-rate mortgage deals are due to end in 2026, and most of these borrowers will need to get a new home loan.Households have benefited from cheaper home loans in recent months after the Bank of England cut interest rates four times in 2025 to bring the base rate down to 3.75%, and until Friday, another rate cut this month had looked very likely.David Hollingworth at the broker L&C Mortgages said: “We are now seeing the first big-name lender moves begin to feed through … Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit.”Adam Stiles at the broker Helix Financial Partners agreed that other lenders were likely to announce higher costs. “The stark reality of recent global events has hit markets with great uncertainty, which has translated into huge volatility in swap rates.” These would not be the first lenders “running for the hills and increasing rates”, he said.The news came as a slump in housebuilding contributed to a deterioration in the UK’s construction sector in February. A monthly survey from S&P Global showed a faster reduction in overall business activity amid weak order books, a lack of new project starts and unusually wet weather. Housebuilding, where the rate of decline accelerated, remained the weakest area.Taylor Wimpey cut its dividend payout to shareholders by nearly a fifth on Thursday after reporting a 54% drop in pre-tax profits to £146.5m last year. Despite improving consumer sentiment, the company’s chief executive, Jennie Daly, said 2026 would be a challenging year with “probably a much lower increase in volumes” than last year.Speculation about potential property tax increases in the months before the November budget hurt house sales in the second half of last year, and Taylor Wimpey started 2026 with a lower order book than in 2025.Daly said the spring selling season – key for housebuilders – had got off to a good start, but that many people still struggled to afford a new home, especially first-time buyers.