NatWest becomes latest major lender to increase its mortgage rates

NatWest is increasing the interest rate on most of its mortgage range by 0.3% (Matt Crossick/PA) (PA Wire)

NatWest has become the latest major lender to hike its mortgage rates, increasing fears that the home loan price war is over.

The high street bank said most of its two year and five year fixed and tracker rate mortgage range will increase in price by 0.3% on Thursday.

Significantly the rate on its flagship five year deal for borrowers making a purchase with a deposit of at least 40% will go back up above the 4% mark, rising from 3.79% to 4.09%.

The rate on the five year fix for borrowers with a 25% mortgage goes up from 3.89% to 4.19%.

Some tracker rates are also going up with a two year deal for purchasers with a 40% deposit increasing from 5.61% to 5.91%.

The sudden about turn after months of falling rates comes amid a sharp rise in yields on gilts that are used to price fixed rate deals. The benchmark ten year gild was today trading at a yield of 4.242%, up about half a percentage point since mid-September. The bond markets have been increasingly fretful about a big increase in borrowing in the Budget over recent weeks that increases the - still remote - risk that investors will not get paid back.

It is a blow for the property market which had finally started to gather momentum as market mortgage rates started to subside, particularly as sub-4% money became increasingly widely available.

However, the Bank of England is still expected to cut its headline lending rate from 5% to 4.75% when its Monetary Policy Committee meets in November.