HSBC delivers bad news for home buyers amid fears of 'Doom Budget'

HSBC has become the latest lender to hike the cost of new mortgages amid fears interest rates may stay higher for longer.

The bank has increased rates across a wide range of fixed deals, despite the Bank of England having already begun trimming its benchmark base rate earlier this summer.

Experts warned that borrowers face a "perfect storm" of higher gilt yields, stubborn inflation and political chaos as the Chancellor's so-called 'Doom Budget' looms on November 26.

Mortgage brokers urged customers looking to get a new mortgage to move quickly, warning: "Every day you wait could cost you."

The rises come as HSBC and Deutsche Bank both pushed back forecasts for Bank of England rate cuts, citing sticky inflation and nervous financial markets.

HSBC now believes the Bank will hold its base rate at 4% until April 2026 - a dramatic shift from its earlier forecast of cuts every quarter starting from August 2024. It expects the rate to fall only gradually, reaching 3% by early 2027.

Deutsche Bank also delayed its prediction for the next cut, moving it from November to December at the earliest, pointing to deep divisions within the Bank of England's Monetary Policy Committee.

Governor Andrew Bailey has admitted there is "considerably more doubt" over when further reductions can be made.

The gloomy outlook comes after inflation in Britain surged to an 18-month high in July - the fastest pace among major advanced economies - leaving markets betting heavily that the Bank will hold rates steady when it meets again on September 18.

HSBC's move follows a flurry of mortgage hikes from rivals, with Santander, Barclays, Halifax and NatWest all repricing their home loans upwards in the past week. Nationwide, Virgin Money and Yorkshire Building Society have also lifted rates on selected fixed deals.

Adam Stiles, of Helix Financial Partners, said: "HSBC have followed a long line of other lenders who have increased rates over the past week or so.

"This could be possibly in anticipation of the upcoming Doom Budget, as well as a number of other economic factors."

Emma Jones, of Whenthebanksaysno.co.uk, told Newspage: "We're starting to see a domino effect among UK lenders, with rate increases being announced by the day. Political chaos and the markets proving increasingly sceptical of the Government's ability to manage the public finances are not helping."

Aaron Strutt, of Trinity Financial, said: "More of the bigger lenders are raising their rates and even though they are not going up by huge amounts, they are enough to noticeably bump up monthly repayments. There will almost certainly be more increases this week."

Louis Mason, of Oportfolio Mortgages, warned borrowers: "Don't wait. Act now. If your current deal ends in the next six months, your number one job is to secure a new rate today. You can always switch later if rates fall, but you can't get back a cheap rate that's gone."