Virgin Money, LendInvest and Coutts are among the latest mortgage lenders to withdraw or push up fixed rates as swap rates continue to rise, increasing the cost of borrowing.
Others changing their pricing include Nationwide, Aldermore, Leeds Building Society, The Bank of Ireland and the State Bank of India, with one broker describing this week as ‘a rough time for the mortgage market’.
On Friday Virgin Money said it was increasing some of its fixed rate products by up to 0.12 per cent. The lender also announced selected product transfer fixed rates will be increased by up to 0.10 per cent.
Borrowers face more financial pressure as the cost of capital has increased on the expectation of future base rate rises.
Both its residential and buy-to-let products are affected. Aldermore has withdrawn all of its fixed rate products across both buy-to-let and residential loans.
In a message note to brokers the lender said the move was in reaction to market conditions. Bank of Ireland is withdrawing some residential and all BTL rates, while Leeds Building society has withdrawn some fixed rate products.
Private bank Coutts has increased the prices of its residential rates. A two-year fixed loan with a 25 per cent deposit has increased from 5.04 per cent to 5.74 per cent.
For a £220,000 mortgage over 25 years the change takes from monthly cost from £1,291 to £1,383, an extra £1,104 a year.
The market is reacting to UK inflation staying higher than anticipated at 8.7 per cent, raising expectations that the Bank of England will continue to increase interest rates – the only tool in its arsenal to try and bring down rising costs.
As a result markets now expect the base rate to rise to 5.5 per cent later this year. It is currently at 4.5 per cent after the central bank’s Monetary Policy Committee hiked it by 0.25 per cent earlier in May.
Since the inflation announcement swap rates – the mechanism most lenders use to set their fixed rates – have increased and this is being fed through to mortgage pricing.
LendInvest has withdrawn all of its fixed term buy-to-let products ahead of a relaunch on Tuesday next week, and the State Bank of India has also withdrawn all of its mortgage products to review pricing.
Nicholas Mendes, mortgage technical manager at John Charcol, said: ‘Speaking with a few lenders they are avoiding making any sudden changes, as that reflects poorly on their relationship with brokers.
‘Pricing is proving to be a key issues especially if we continue to see swaps increase. What we don’t want is lenders pulling deals over the weekend.’
Mortgage holders coming off fixed rates face a shock as they move on to a new deal
Specialist mortgage lender Foundation Home Loans is withdrawing all of its products from Friday afternoon to Wednesday 31 May.
In a message to brokers it said ‘all decisions in principle will need to be submitted by the end of today (Friday 26th May)’.
Justin Moy, managing director at broker EHF Mortgages, said: ‘More lenders that are heavily reliant upon the swap rates to fund their products are pulling rates with little or no notice.
‘Many of these lenders are for the specialist markets, rather than for the main residential clients, so the real effect is quite small, but with most of the high street already repriced this week, it has been a rough time for the mortgage market.’
What to do if you’re looking for a new mortgage
If you have a fixed rate or other mortgage deal term ending then it is worth thinking at least six to nine months ahead and exploring your options.
Consider both what your existing lender can offer you – although some may not allow you to act until closer to the time – and what a good mortgage broker recommends in terms of switching to a new bank or building society.
Read our guide to remortgaging and what you need to know to understand more.
As rates have been steadily rising, some lenders have been extending the time frame in which existing customers can lock in a new deal ahead of your current mortgage ending. This allows borrowers to get a more favourable rate ahead of future rises.
And you are not necessarily committing yourself to the next product at this stage, so you can always reapply to another lender if rates go down before your deadline.
First Direct’s head of mortgages Carl Watchorn told This is Money: ‘For anyone coming to the end of a fixed rate mortgage either immediately or in the next six months, the important thing is you are able to secure a rate six months in advance.
‘Try not to panic, seek advice and make sure the product you are looking to sign up for gives you all the features you need.’
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