Number of mortgages on offer drops 7% in a week as lenders react to interest uncertainty
Mortgage offers drop 7% in a week as more lenders remove loans or raise rates due to inflation concerns
- Coventry Building Society and Accord are among the latest lenders to cut rates
- It follows moves or reprices from Nationwide, Halifax, Accord and others
- They are responding to higher than expected inflation rates
The number of mortgage products on the market is down 7 percent in a week as lenders react to higher-than-expected inflation and forecasts of further base rate hikes.
Banks and building societies have taken certain mortgages off the market, either to bring them back at higher rates or to remove them altogether.
Coventry Building Society is the latest lender to cut its rates and withdraw two, three and five year fixed rates for new customers with deposits of 35 per cent and 20 per cent.
In a message to brokers, the lender said the products would no longer be available after 8 p.m. on May 31. It has also scrapped some of its interest-only fixed rates.
Changes: Lenders are repricing mortgage rates because of inflation concerns
Accord Mortgages, the brokerage arm of the Yorkshire Building Society, is increasing rates by up to 0.77 percentage point for new customers and by 0.4 percentage point for transfer products such as remortgages, also from 31 May.
The lenders join many others who have withdrawn or raised rates in the past week, including Nationwide, Halifax and Aldermore.
Since the beginning of last week, the number of mortgages has fallen from 5,385 deals to 5,012, financial information service Moneyfacts reports.
The average interest rate on a mortgage with a fixed term of two and five years has risen since the beginning of May 2023 to 5.38 percent and 5.05 percent respectively.
Moneyfacts’ Rachel Springall said: ‘This volatility is due to concerns about future rate hikes, and lenders are reconsidering their proposals.
“Consumers looking to refinance are finding rates around 5 percent on average for a firm deal, compared to about 3 percent a year ago.
“It is vital that borrowers seek advice to assess the situation and find a mortgage that suits their situation.”
The market is reacting to UK inflation remaining higher than expected at 8.7%, raising expectations that the Bank of England will continue to raise interest rates – the only tool available to try to reduce rising costs.
Mortgage prices are rising as the Bank of England is expected to continue raising key rates
As a result, markets now expect base rates to rise to 5.5 percent later this year. It currently stands at 4.5 percent after the central bank’s Monetary Policy Committee raised it by 0.25 percent earlier in May.
Since the inflation announcement, swap rates – the mechanism most lenders use to set their fixed rates – have risen and this is reflected in mortgage prices.
Rapid withdrawals can cause problems for borrowers and brokers, who are suddenly faced with short deadlines to complete a full application to secure a mortgage before interest rates change.
In this case, Coventry gave 48 hours, but others have taken mortgages off the market much more quickly.
Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said:
“This is in stark contrast to some lenders late last week who gave us just a few hours to withdraw entire ranges. It is mentally exhausting for customers, for us and for 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 beginning 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 interest rate on a two- and five-year fixed buy-to-let mortgage increased from 5.56 percent and 5.52 percent, respectively, to 5.61 percent and 5.52 percent.