This is rooted in further predicted increases later this year with many industry professionals believing that rates wont stop until they hit 6 per cent, possibly even tipping over to 6.25 per cent.
With the base rate remaining on hold, at least for the next month, we may have expected the mortgage market to have settled, commented Lisa Taylor, spokesperson for Moneyfacts.co.uk. However this is far from the case, especially for fixed rate deals which have been either disappearing off the shelves or increasing rapidly.
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Since the shock base rise in January, the general trend has been of rising fixed rates. With swap rates now topping 6 per cent and short term rates in excess of 6.25 per cent, it is no wonder that lenders need to re-price their deals.
Taylor added that at least nine mortgage lenders have withdrawn products since the start of June. Cumberland, Cambridge and West Bromwich Building Societies have all withdrawn their entire fixed rate offering without introducing any replacements, whilst Mansfield, Chesham, Dudley and Beverley Building Societies have withdrawn 2, 3 and/or 5 year fixed rates. In addition Birmininham Midshires Solutions and Abbey have withdrawn a selection of fixed rate products.
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Taylor continued: A further 30 lenders have increased the rate on their fixed rates deals by as much as half a per cent. This includes some of the larger mortgage lenders, including Abbey (by up to +0.30 per cent), NatWest Mortgage Services (by up to +0.50 per cent), Bank of Scotland Mortgages (by up to +0.30 per cent) and Royal Bank of Scotland (+0.20 per cent).
Fixed rate deals under 6 per cent are still readily found, but if swap rates continue to rise at their current pace it wont be long before we see the demise of sub six percent mortgages, unless you are prepared to pay a massive upfront fee. Anyone coming to the end of a fixed rate deal, especially those who were on five year deals, will be in for a nasty shock when they see the increase in their monthly repayments.
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With around 70 per cent of mortgage applications for fixed rate deals, the additional demand, competition and expectations of a further rise are simply pushing up prices. As lenders take a conscious approach to retain rates at the lowest possible level, it is even more important for us to move away from a rate focused comparison and to take into account the full costs of the mortgage deal.
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