Mortgage rates have risen for the first time in three months as panicked lenders prepare for Labour’s “painful” Budget. 
Borrowers are being urged to lock in their mortgage deals now as rates are expected to keep climbing after months of falling.

Both NatWest and Santander increased the interest rates on their fixed-rate mortgages as brokers warned more lenders will follow suit.

It comes as swap rates – the main pricing mechanism for home loans – rose over the past few weeks driven by concerns over potential increases in government borrowing.

From Wednesday, NatWest will raise rates across its two-year and five-year fixed loans by 0.3pc. A five-year fixed rate for buyers with a 40pc deposit or equity will rise from 3.79pc to 4.09pc.

Meanwhile, Santander has increased some of its fixed mortgage rates by up to 0.22pc.

Figures from analysts at Moneyfacts show the average rate on a home loan increased for the first time in three months.

The average two-year fixed residential mortgage rate rose to 5.37pc from 5.36pc on Friday, while the five-year fixed rate average rose to 5.06pc from 5.05pc.

Broker Justin Moy, of EHF Mortgages, said: “Expectations of how the market will react to the ‘painful’ Labour Budget that is looming, coupled with nervousness around world oil prices increasing, makes for a tough narrative at the moment, and shows how sensitive our economy has become.

“Borrowers need to work swiftly and secure deals as soon as possible, just in case this trend becomes longer than originally planned.”

Despite the upward trend in interest rates, traders still expect the Bank of England to make at least one cut to the Bank Rate before the end of the year from its current level of 5pc.

The central bank cut its headline interest rate in July after two and a half years of rises.

Until this month, rates had been falling as swap rates were also coming down on the expectation that the central bank’s downward trend was here to stay.

Borrowers who are looking to take out a mortgage or need to re-fix their current loan face the risk of increased costs.

Nicholas Mendes, of mortgage broker John Charcol, said: “For mortgage holders with less than six months remaining on their fixed-rate deal, it is advisable to start reviewing your options now.

“Many lenders allow you to lock in a new rate up to six months in advance, which could shield you from potential further increases.”

Mr Mendes also notes that the recent changes don’t necessarily mean the direction of travel for rates over the next year has moved and the long term direction is still positive.

Even so, all eyes will be on what Ms Reeves announces at the end of the month and the MPC committee’s rate decision in November.

While the committee is expected to opt for a rate cut, the split of votes is likely to give an indication of the longer term trajectory for interest rates.