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Listen nowMortgage rates rise as lenders pull hundreds of deals
Nearly 800 mortgage products taken off market within a week
A host of lenders have upped interest rates on their mortgage deals in response to stubbornly high inflation and predictions of further base rate hikes.
Hundreds of mortgage products have been withdrawn from the market in the past week.
Here, Which? delves into why rates are beginning to shift and how borrowers will be impacted.
What's happening to mortgage rates?
Having reached a peak last autumn, rates had been falling week-on-week and sub-4% deals began emerging in February. However, rates plateaued in the following months and are now back on the rise.
Higher-than-expected inflation figures have fuelled predictions the Bank of England will have to raise interest rates even further to combat rising prices.
The Bank's base rate - which plays a pivotal role in determining mortgage rates - currently stands at 4.5%, following 12 consecutive increases, and is now expected to hit 5.5% later this year.
As a result, lenders are adjusting their mortgage deals and upping their rates. Nationwide has hiked its fixed rates by up to 0.45% to ensure they 'remain sustainable', and a host of other providers have followed suit.
Major lenders such as Halifax, HSBC, Santander and Virgin Money are among those to have increased the cost of their deals. The sharpest rise has come from Accord Mortgages - the broker-only arm of Yorkshire Building Society - which has upped its fixed rates by up to 0.77 percentage points.
According to Moneyfacts, the changes have caused the average two-year fix to rise from 5.33% to 5.46% in the space of a week. The average five-year fix has also risen, going from 5.01% to 5.12%.
- Find out more: best mortgage lenders
Lenders pull mortgage products
As well as increasing their rates, lenders have also axed hundreds of deals - in fact almost 10% of the UK's mortgage products have been taken off the market since 22 May.
A total of 373 residential mortgage deals have been wiped and the number of buy-to-let mortgages has fallen by 405.
Lenders such as Halifax, Newcastle Building Society and Kensington are among those to have deleted products, while some smaller-scale providers have pulled their entire fixed-rate range.
- Find out more: what to do if you can't pay your mortgage
'Providers reassessing their options'
Rachel Springall, finance expert at Moneyfacts, 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.'
Having almost 800 products disappear may sound alarming, but it is likely this will only be a temporary measure and deals will soon remerge - albeit at higher rates.
The table below shows the change in the number of products over the last week.
| Mortgage type | Number of mortgage products on 22 May | Number of mortgage products on 30 May | Difference |
|---|---|---|---|
| Residential | 5,385 | 5,012 | -373 |
| Buy-to-let | 2,748 | 2,343 | -405 |
Source: Moneyfacts
To put things in perspective, thousands of products were pulled and the mortgage market was left in disarray following the government's mini-budget last September. So as things stand, we are still far from the turbulence seen last autumn.
How mortgage rates have changed
The graph shows how rates for two, three and five-year fixes have altered in the past year, according to Moneyfacts.
Remortgagers face big increases to mortgage bills
Homeowners refinancing this year are in for a shock due to the level at which mortgage rates have changed.
In the first three months of this year, 353,000 fixed-rate mortgages came up for renewal, with a further 1.1m coming up before the end of the year, according to calculations from the Office for National Statistics (ONS).
Hordes of homeowners took out two-year fixes in 2021 after snapping up a property before the stamp duty holiday came to an end. Now, as they come to remortgage, they're being met with drastically different figures.
Data from Moneyfacts shows the contrast between average rates for two-year and five-year fixes in 2021 compared to 2023.
| Type of mortgage | Average rate in May 2021 | Average rate in May 2023 |
|---|---|---|
| Two-year fixed rate | 2.57% | 5.38% |
| Five-year fixed rate | 2.79% | 5.05% |
To see the best deals currently on offer, head to our story on the best mortgage rates for home movers and first-time buyers. This is regularly updated as lenders continue to chop and change their offers.
- Find out more: what to do if you need to remortgage
Finding the right mortgage deal
Choosing the right deal can be difficult. If you're not sure how best to proceed, we recommend taking advice from a whole-of-market mortgage broker, who will be able to find a suitable loan for your personal circumstances.
If you're comparing deals yourself, you should always keep an eye on the full cost, and not just the initial rate. Lenders can mask a more expensive deal by offering a cheaper rate but saddling the product with a high fee.
Take your time and shop around before settling. Some borrowers prefer to take out a loan with a bank they already have a current account with, but this can be a costly mistake if it doesn't offer competitive rates.
- Find out more: how to find the best mortgage deal
