NatWest Group is implementing another round of mortgage rate increases, this time targeting existing customers and those seeking additional borrowing, with the changes set to take effect on March 10. This move follows closely on the heels of the bank's decision to raise pricing for new mortgage products just days earlier. The adjustment signals a rapid reversal in the UK housing finance landscape, where rates had experienced a short-lived decline before snapping higher.
Broad-Based Lender Repricing
The shift is not isolated to NatWest. Several other major financial institutions are following suit. Barclays has announced plans to increase selected residential purchase and remortgage rates starting March 10. Halifax has already elevated a wide range of its fixed and tracker mortgage offerings. Santander is poised to join, with planned rate hikes on certain products from March 11. The repricing wave has extended to smaller providers, with some opting to withdraw mortgage products from the market entirely rather than adjust rates.
According to data from Moneyfacts, the average two-year fixed residential mortgage rate in the UK increased to 4.84% in the week beginning March 4, up from 4.82%. This movement was underpinned by a sharp rise in wholesale funding costs. Between March 4 and March 6, the two-year swap rate—a key benchmark lenders use to price fixed-term mortgages—jumped to 3.65% from 3.33%. The five-year swap rate similarly climbed to 3.80% from 3.50%.
Market Context and Economic Drivers
Nicholas Mendes, mortgage technical manager at John Charcol, noted that NatWest's swift action demonstrates how rapidly lender pricing can respond to movements in underlying funding costs. The primary catalyst for the recent volatility has been a surge in oil prices, which powered past $100 a barrel, jolting financial markets. This development sent UK government bond yields higher and fundamentally reshuffled investor expectations for monetary policy from the Bank of England (BOE).
The BOE's key Bank Rate currently stands at 3.75%, with its next policy decision scheduled for March 19. Market expectations for that meeting have undergone a dramatic shift. Jonathan Raymond, an investment manager at Quilter, observed that the perceived probability of a March rate cut has collapsed from 95% to just 2.5%. Some analysts, however, believe the market reaction may be overdone. David Roberts, head of fixed income at Nedgroup Investments, suggested that if the oil price shock proves temporary, a BOE rate hike remains "highly unlikely."
Impact on a Weakening Housing Market
The rise in borrowing costs is impacting a housing market already showing signs of strain. Data from the Bank of England revealed that mortgage approvals for house purchases fell to a two-year low in January. This softening in demand contrasts with price data from Halifax, which indicated UK house prices in February were still 1.3% higher than a year ago, highlighting a complex and potentially fragile market dynamic.
Strategic Moves Amid Financial Strength
For NatWest, the rate adjustments come during a period of strategic expansion and robust financial performance. Just last month, the bank reported a 24% surge in its 2025 pretax profit to £7.7 billion. It concurrently raised its return target and launched a £750 million share buyback program. Chief Executive Paul Thwaite characterized the period as one of "raising our ambition."
Further underscoring its growth strategy, NatWest recently entered into a £2.7 billion agreement to acquire wealth manager Evelyn Partners. This transaction marks the bank's largest deal since its government bailout in 2008 and is a clear push to capture more fee-based revenue, a competitive arena where rivals like HSBC and Lloyds are also active. RBC Capital Markets analyst Benjamin Toms described the acquisition as "transformational," arguing it addresses a significant gap in NatWest's service offerings for affluent clients.
The confluence of rising mortgage rates, shifting central bank expectations, and a cooling housing market presents a critical juncture for UK consumers and the broader economy. The actions of major lenders like NatWest, Barclays, and Halifax will directly influence affordability and demand in the coming months, with all eyes now on the Bank of England's next policy move.
