Mortgage deals are disappearing, with lenders temporarily withdrawing their products due to ongoing economic uncertainty.
More than 900 mortgages were taken off the market between Tuesday and Wednesday this week, according to Moneyfacts. The withdrawals included products from major lenders such as Halifax and Virgin Money.
Here, we explain why mortgages are disappearing and outline the cheapest deals still available for home movers and first-time buyers.
Lenders pull mortgages amid market volatility
Some of the UK's biggest mortgage lenders have temporarily withdrawn their deals for home buyers and people remortgaging.
The dramatic drop in the value of the pound has led to expectations that the Bank of England's base rate will rise more steeply than expected.
In technical terms, this has led to a rise in gilt yields, which has fed through to swap rates. Swap rates influence the cost of borrowing for banks, so the rise has left lenders scrambling to reprice their mortgages.
In simpler terms, banks have encountered a dramatic rise in their costs, and are withdrawing their deals while they work out what to do next.
Moneyfacts says the drop in mortgage deals this week is the biggest since it started keeping records in 2011.
If you've already applied for a mortgage and been accepted, your application should go ahead as planned - but check with your mortgage broker or the lender.
- Find out more: discover how rate changes could affect you with our mortgage repayment calculator
What's happening to mortgage rates?
Mortgage rates have been rising for some time. Last week, the Bank of England increased the base rate to 2.25%. This was the seventh increase since December, when the rate was at a historic low of 0.1%.
These hikes are part of the Bank’s attempts to keep rising inflation at bay. CPI inflation hit 9.9% in August, nearly five times the target of 2%.
The cheapest mortgage rates are now around five times the record lows of 0.79% recorded last October, when there were more than 100 fixed-rate mortgages with rates below 1%.
- Find out more: how to find the best mortgage deals
Note: The below figures are correct at time of writing, bur there's no guarantee the specific deals we've listed will remain on the market. If you're looking to apply for a mortgage imminently, a whole-of-market mortgage broker will be able to give you up-to-date advice on your options.
Best rates for borrowers with big deposits
The best mortgage rates are usually available for people borrowing at 60% loan-to-value, although even these market-leading deals are now priced above 3.5%.
Two-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| NatWest | 4.07% | 4.99% | £995 |
| Royal Bank of Scotland | 4.07% | 4.99% | £995 |
| Barclays | 4.25% | 5.99% | £999 |
Cheapest rate with no upfront fee: 4.29% (NatWest/Royal Bank of Scotland)
Five-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| NatWest | 3.78% | 4.99% | £995 |
| Royal Bank of Scotland | 3.78% | 4.99% | £995 |
| Halifax | 3.93% | 5.74% | None |
Cheapest rate with no upfront fee: 3.93% (Halifax)
Best rates on 90% mortgages
If you're looking to buy your first home, you can get a mortgage with a deposit of 5% of the property's value (known as a 95% mortgage). If you can stretch to a 10% deposit, however, you can benefit from a much lower rate.
First-time buyers with smaller deposits weren't immediately affected by the base rate rises at the start of the year, but these mortgage deals have been creeping up in cost for the past few months.
Two-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| NatWest | 4.22% | 4.99% | £995 |
| Royal Bank of Scotland | 4.22% | 4.99% | £995 |
| Clydesdale Bank | 4.40% | 4.99% | £995 |
Cheapest rate with no upfront fee: 4.40% (NatWest)
Five-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| NatWest | 3.93% | 4.99% | £995 |
| Royal Bank of Scotland | 3.93% | 4.99% | £995 |
| Halifax | 4.17% | 5.99% | None |
Cheapest rate with no upfront fee: 4.17% (Halifax)
Best rates on 95% mortgages
Borrowers with the smallest deposits generally pay the highest mortgage rates. Rates on 95% mortgages have been rising slowly, and the vast majority of deals are now priced at above 4%.
Two-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| Barclays | 4.60% | 5.24% | None |
| Clydesdale Bank | 4.68% | 5.99% | £999 |
| NatWest | 4.79% | 4.99% | None |
Cheapest rate with no upfront fee: 4.60% (Barclays)
Five-year fix
| Lender | Initial rate | Revert rate | Upfront fee |
|---|---|---|---|
| NatWest | 4.59% | 4.99% | None |
| Royal Bank of Scotland | 4.59% | 4.99% | None |
| Halifax | 4.61% | 5.74% | None |
Cheapest rate with no upfront fee: 4.59% (NatWest/Royal Bank of Scotland)
Does a lower rate always mean a cheaper deal?
Above, we've listed the deals with the cheapest initial rates. This gives a good indication of the rate you might be able to get, depending on the size of your deposit, but before choosing a deal you'll also need to factor in upfront fees.
Some lenders charge fees as high as £1,999 on their lowest-rate deals. By charging higher fees, lenders can offer better rates and recoup the shortfall elsewhere.
Banks commonly charge fees such as £999, £1,499 or £1,999, but some use percentages instead - for example 0.5% of the overall loan amount. If you're borrowing a larger sum, this can be significantly more expensive.
You'll usually need to pay a premium of 0.2%-0.5% to get a fee-free deal. Sometimes, this can pay off. For example, if you can get a mortgage at 4% with a £999 fee, or 4.1% with no fee, the latter will be cheaper over the fixed term.
If you're unsure about which type of deal to go for, a mortgage adviser will be able to analyse deals based on their true cost, taking into account rates, fees and incentives.
- Find out more: best mortgage lenders
How long should you fix your mortgage for?
One of the biggest questions when it comes to mortgages is: for how long should you lock in your rate?
Borrowers most commonly fix for either two or five years. Five-year deals were once significantly more expensive, but in some instances it's now actually cheaper to fix for longer.
Securing your rate for longer is a good idea in theory, but it's not the right move for everyone.
Five-year fixes usually come with higher early repayment charges, meaning that you could be charged thousands of pounds if you decide to repay the mortgage early (for example, if you move home and don't transfer it to the new property).
With this in mind, it's important to think of your own medium and long-term plans before settling on a fixed term.
What will happen next in the mortgage market?
It's a very volatile time for the mortgage market, both in terms of rates and availability.
Homeowners on variable-rate deals (such as tracker mortgages) are most exposed to base rate changes, but those coming to the end of their fixed terms are now likely to encounter much higher rates when they remortgage.
It's likely that mortgage rates will continue to rise in the short term, with further base rate hikes on the horizon.
If your fixed term is coming to an end, it's as important as ever to remortgage before being moved on to your lender's standard variable rate (SVR). SVRs currently average 5.4%, well in excess of what you'll pay on a new fixed-rate deal.
- Find out more: how to get a good deal when remortgaging
source https://www.which.co.uk/news/article/banks-withdraw-hundreds-of-mortgages-the-best-rates-still-available-for-home-movers-and-first-time-buyers-a4UXE8P7K0bT