Number of mortgages on offer drops 7% in a week as lenders react to interest uncertainty

Number of mortgages on offer drops 7% in a week, as more lenders remove loans or increase rates due to inflation concerns

  • Coventry Building Society and Accord are among the latest lenders to pull rates
  • It follows removals or repricing from Nationwide, Halifax, Accord and others
  • They are acting in response to higher-than-expected inflation figures

The number of mortgage products on the market has fallen by 7 per cent in a week, as lenders respond to higher-than-expected inflation and predictions of further base rate hikes. 

Banks and building societies have taken certain mortgages off the market, either to bring them back with higher rates or to remove them altogether.

Coventry Building Society is the latest lender to pull its rates, withdrawing two, three and five-year fixed rates for new customers with 35 per cent and 20 per cent deposits.

In a note to brokers the lender said the products would no longer be available after 8pm on 31 May. It has also removed a number of its interest-only fixed rates.

Changes: Lenders are repricing mortgage rates due to concerns over inflation

Accord Mortgages, the broker-only arm of Yorkshire Building Society, is increasing rates by up to 0.77 percentage points for new customers and 0.4 percentage points for transfer products such as remortgages, also from 31 May. 

The lenders join many others who withdrew or priced up rates over the past week including Nationwide, Halifax and Aldermore.

Since the start of last week, the number of mortgages has fallen from 5,385 deals to 5,012, according to the financial information service Moneyfacts. 

The average rate on a two- and five-year fixed mortgage have risen to 5.38 per cent and 5.05 per cent respectively since the start of May 2023, according to its figures.

Rachel Springall of Moneyfacts said: ‘This volatility is down to the concern surrounding future interest rate hikes, and lenders are reassessing their propositions. 

‘Consumers looking to refinance will find rates around 5 per cent on average for a fixed deal, compared to around 3 per cent a year ago. 

‘It is vital borrowers seek advice to assess the situation and to find a mortgage that suits their circumstances.’

It comes as analysts at Capital Economics have forecast that average quoted mortgage rates could rise from 4.3 per cent last month, to 5.7 per cent by the start of 2024 – a similar peak to last autumn in the aftermath of the mini-Budget.

This, its report said, could ‘undermine the recent pick-up in mortgage approvals’ and lead to ‘renewed falls in house prices’ of up to 8 per cent. 

Mortgage prices are rising as the Bank of England is expected to continue raising the base rate

Mortgage prices are rising as the Bank of England is expected to continue raising the base rate

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 available 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.

Rapid withdrawals can cause issues for borrowers and brokers, who are suddenly faced with short deadlines to submit a full application to secure a mortgage before the rate changes.

In this case Coventry has given 48 hours, but others have removed mortgages from the market much more quickly. 

Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said: 

‘This is in stark contrast to some lenders at the end of last week who gave us just a couple of hours before withdrawing entire product ranges. It’s mentally exhausting for clients, us and everyone else involved in the process.’

Lenders are also withdrawing buy-to-let mortgages. Precise Mortgages, Kensington and Kent Reliance are among those who have reduced their product offerings in recent days. 

Since the start of last week, the number of buy-to-let mortgages has fallen from 2,748 deals to 2,343. 

At the same time the average rate on a two- and five-year fixed buy-to-let mortgage has risen to 5.61 per cent and 5.52 per cent from 5.56 per cent and 5.52 per cent respectively.

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for 

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