Barclays raises mortgage rates as gilt yields hit 27-year high; households urged to lock in deals

Barclays said it will increase a number of its best-buy mortgage rates by 0.10 percentage points with effect from 3 September, prompting lenders and advisers to urge homeowners and prospective buyers to lock in deals now as government bond yields hit a 27-year high.

The lender's market-leading two-year fix for purchasers with a 40% deposit will rise from 3.75% to 3.85%. Barclays also currently offers one of the lowest five-year fixes on the market but said similar increases would take effect from the same date. On a £200,000 mortgage repaid over 25 years, the two-year change raises monthly payments from about £1,029 to £1,039.

The decision follows a sharp rise in long-term gilt yields, which climbed to their highest levels in nearly three decades as global investors expressed concern about the state of public finances ahead of an autumn budget. Higher gilt yields feed through to mortgage pricing because many lenders fund fixed-rate mortgages by referencing swaps and government bond markets.

Market participants said the move by Barclays is likely to remove some of the cheapest deals from best-buy tables overnight, reducing the pool of low-cost fixed options available to borrowers. Mortgage brokers and comparison sites warned that customers on short-term product expiration or those currently shopping for a mortgage could face higher costs if they delay.

The memory of the 2022 market turbulence — when a sharp spike in government bond yields briefly sent mortgage rates sharply higher — remains a reference point for advisers and borrowers. Analysts said while mortgage pricing reflects a range of inputs including swap rates, retail funding costs and competition among lenders, sustained upward moves in gilt yields generally put upward pressure on fixed mortgage offers.

Barclays' announcement is the latest sign of volatility in the UK fixed-rate mortgage market. Lenders review pricing regularly and sometimes make changes to specific product ranges in response to shifts in wholesale markets. Industry figures noted that not all lenders will move in lockstep, so some borrowers might still find competitive alternatives depending on deposit size, loan-to-value and product term.

The Bank of England sets Bank Rate, which directly affects variable-rate mortgages, but fixed deals are more immediately sensitive to movements in longer-term market rates. With the government's autumn fiscal plans expected to influence investor sentiment further, mortgage advisers said borrowers who want certainty over payments should consider securing a fixed-rate deal soon and seek personalised advice to compare the full cost and terms.

Barclays did not immediately respond to a request for comment beyond its customer notices outlining the changes. Lenders and brokers said customers with deals due to expire in the coming weeks should contact their provider or mortgage adviser to assess options before the scheduled increases take effect.