Hundreds of mortgage options pulled as fixed mortgage rates rise

Hundreds of residential mortgage deals were withdrawn from the market over the weekend according to data from Moneyfactscompare.co.uk. 

More than 280 mortgage options were removed by lenders from Friday to Monday, representing a 4% drop. 

This follows a downward trend from a week earlier, when 373 mortgage options were removed in the week to 30 May. 

On 24 May it was announced that UK inflation dropped to 8.7% in the year to April, the first time it has dropped below 10% since August and its lowest since rate since March 2022 - yet this fall was less dramatic than had been predicted by economists.

As a result, analysts now expect the Bank of England to increase its base rate and the number of available deals show mortgage lenders have been responding.

The number of mortgages available on 22 May stood at 5,385, but the number available then began falling, reaching 4,967 by 1 June and down to 4,686 by Monday.

Moneyfacts data also revealed that on Monday the average rate on a new two-year fixed mortgage stood at 5.72%, compared with 5.26% at the start of May. 

This increase roughly translates to an additional £45 per month onto a mortgage of £200,000 over 25 years. 

Santander and Furness Building Society are among the lenders who removed some of their fixed rates while the Co-operative Bank withdrew its entire mortgage range.

Halifax and Leeds Building Society, however, increased some of their fixed rate offerings by 0.30% and 0.40% consecutively.

“Over the past few days, we have seen a few lenders withdraw selected fixed products, with some pulling out of the market, at least temporarily,” Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said.

“Product choice has started to fall, and as may be expected, average fixed mortgage rates are on the rise. This volatility is down to the concerns surrounding future interest rate hikes, and lenders are reassessing their propositions.  

“Consumers looking to refinance will find rates around 5% on average for a fixed deal, compared to around 3% a year ago.”  

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>>See also: Housebuilding activity plummets to lowest level since pandemic

Almost a fifth (19%) of mortgages taken out by first-time buyers in March were for terms of 35 years or longer, according to a report by UK Finance set to be published tomorrow.

This is the highest proportion of 35+ year loans since records began in 2005, and is more than double the proportion (9%) taken out by first-time-buyers in December 2021, when the Bank of England base rate first went up from a low of 0.1%. 

Share prices for major housebuilders Barratt, Taylor Wimpey and Persimmon all dropped yesterday.