Borrowers Rush to Fix Deals as Lenders Increase Price

by Mark Johnston

The clock is ticking for borrowers looking for a great fixed rate deal. With swap rates on the increase, banks and building societies are starting to increase their prices or take the cheapest deals off sale.

With lenders expecting an increase in interest rates later on this year, many providers are taking their best fixed rate deals off the market. The Halifax, the Uk’s biggest mortgage lender is the latest company to review their product offering and remove their best value deals.

A spokesperson talking on behalf of the Halifax said: “Recent movements in funding costs have led to us re-price some of our mortgage products, and we continue to keep our rates under review.”

The Halifax is the latest in a long list of lenders to take this measure. Recently Barclays confirmed that they would stop selling their ten year fixed rate mortgage and at the same time would look to increase their existing products by around 0.5%.

The change at Barclays came after similar announcements at other banks and building societies such as First Direct and best buy leader Yorkshire Building Society. First Direct, the leader in low cost mortgages removed its two and five year fixed rate deals for those with a loan to value of 65%. AT the same time the Yorkshire Building Society increased its three, five and ten year deals by up to 0.2%.

David Hollingworth, from London & Country mortgages, said: “I fully expect that these deals will not be the last to be pulled from the market. Any of the sharper fixed rates will be under pressure and that can lead to a domino effect – one withdrawal leads to another becoming more competitive and having to revise its rates in turn. We are now down to barely a handful of five-year fixed rates below 4pc and these must be under threat.”

The news has sparked a new rush by borrowers to try and fix their current mortgage deal before prices go too high. With figures released by the Council of Mortgage Lenders (CML) showing further falls in lending the pressure on borrowers to secure a good deal is increasing. The price of wholesale borrowing has increased. Banks and building societies have to raise credit to be able to lend to their customers on the swap market but prices have been soaring in the last few months.

Peter Charles, CML economist, said: “Money market rates have recently moved higher in anticipation of a rise in base rate and some lenders have recently reflected these increases in their product pricing. Against this backdrop, consumer demand may be weaker than we would otherwise have expected. Higher interest rates will also hit the budgets of existing borrowers, although the expected modest rises in base rate will result in a relatively small proportionate rise in monthly payments for most mortgage holders. Consequently we believe there will be little change in the level of arrears this year, and we do not anticipate revising our current arrears forecast.”



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