Bond traders responded to Kwasi Kwarteng’s tax and spending plans on Friday, sending yields on two-year gold up 36 basis points to 3.87 percent and those on 10-year gold up 23 basis points to 3.72 percent. Ray Boulger, senior technical director of mortgages at broker John Charcol, said the bond moves would have a “big impact” on the mortgage market. Changes in gilts typically feed into swap rates, which lenders use to guide their mortgage pricing decisions. On Friday, Boulger warned colleagues to rule out any pending fixed rate deals for clients as soon as possible. “I can see some lenders either closing their deals or raising their rates as early as today,” he said. Some lenders may even withdraw their rate agreements for a few days, he added, as they wait for the bond market to settle. The moves will add to the pressure already on borrowers this week after some lenders raised their mortgage rates and pulled deals ahead of a 0.5 percentage point rise in the Bank’s main rate. Santander raised fixed rates by up to 0.8 percentage points on its home loans on Wednesday, while NatWest added 0.35 percentage points to its two- and five-year fixed-rate deals for buy-to-let and 0.2 percentage points to the same deals for customers from new mortgage loans.

Platform, the Co-operative Bank’s mortgage lending arm, withdrew all interest rate deals on Thursday. Coventry Building Society announced it would withdraw all its deals available to borrowers with a loan-to-value ratio below 85 per cent on Friday, as well as all three-year fixed rate deals. Pricing in the bond market isn’t the only reason for lenders to raise rates and foreclose on deals. Andrew Montlake, managing director at brokerage Coreco, said lenders worried about their ability to meet the surge in customers often used interest rates to stifle demand. “They can’t afford to stay at the top of the ‘best buy’ charts. They have to reprice or they just get flooded and can’t protect their service levels,” he said. In today’s environment, he added, lenders are likely to raise their rates by significant margins of around 0.5 percentage points. “We’re in for a tough week,” said Simon Gammon, managing partner at broker Knight Frank Finance. “If the last few months are anything to go by, the notice that mortgage brokers have been given that a rate is being withdrawn is hours, not days.” A rise of half a percentage point in the current average standard variable rate – usually the most expensive type of mortgage – by 5.4 per cent would add around £1,443 to total repayments over two years, according to finance website Moneyfacts. Three-quarters (74 per cent) of mortgage borrowers are shielded from the immediate impact of rising interest rates by taking out a fixed-rate deal, according to the Financial Conduct Authority, although half of these are due to expire within the next two years. “Many of the cheapest deals from the bigger lenders are well over 4 per cent, but it doesn’t look like it will be long before they get closer to 5 per cent,” said Aaron Strutt, technical director at brokerage Trinity Financial. Additional reporting by Keith Fray