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UK five-year swap rates hit 3-year high, lifting fixed mortgage costs
The five-year swaps rate rose above 4.52%, following a surge in gilt yields, as oil price fears fed expectations for higher inflation and interest rates.
UK mortgage borrowers are bracing for higher fixed-term borrowing costs after UK swap rates used to price mortgages rose to a three-year high amid turmoil in global bond markets, according to the Guardian Business.
On Wednesday, the five-year swaps rate climbed above 4.52%, a level last seen in October 2023, which is expected to translate into higher interest rates on fixed-term mortgages.
The sell-off in bonds was linked to a jump in oil prices, with concerns that higher inflation could follow, after US and Iran exchanged fire this week for the first time in a month.
Although the immediate bond-market stress eased on Thursday, fixed-year mortgage rates were unchanged, while the article notes that wider moves in government borrowing costs could still weigh on efforts to ease cost-of-living pressures.