Lenders slam the door on mega-cheap mortgages

ULTRA-cheAp mortgage deals are fast disappearing amid growing fears of an imminent interest rate rise.

Nationwide and NatWest are among lenders to have pulled all of their five-year fixed products priced below 1 per cent.

The number of loans available in that bracket has now dropped by almost a third in a fortnight.

Mortgage rates fell to a record low this summer as banks and building societies fought to attract customers.

But analysts believe that the price war may now be over.

Bank of england governor Andrew Bailey cautioned last weekend that interest rates may have to rise in a bid to curb soaring prices.

Yesterday the Bank’s chief economist, huw pill, said that with inflation likely to hit 5 per cent early next year, the decision on whether or not to increase rates in November was very much ‘live’.

The city is betting on a rise as early as next month. The Bank of england base rate was cut to an all-time low of 0.1 per cent at the start of the pandemic in March last year.

Any increase will hit homeowners with variable rate deals and already struggling with higher energy and food bills.

A rise of 0.5 percentage points would add around £50 a month to the cost of a £200,000, 25-year mortgage.

A 1 per cent increase would add around £90.

‘It seems inevitable that lenders will start to increase fixed rates,’ said Andrew Montlake of mortgage broker coreco yesterday.

‘The question is whether the Bank of england holds its nerve or feels it has to act sooner rather than later.’

Many lenders are already starting to increase the fixed rates in the deals they are offering new customers.

David hollingworth of broker L&c said: ‘Borrowers have enjoyed a period where it felt like rates would drop ever lower. That movement has now taken a rapid turn and we’re already seeing fixed rates rising.

‘The market remains competitive but fixed rates will shift as market expectation of a rate rise grows.’

Nationwide hiked its rates on offer for borrowers who can put down a 40 per cent deposit on Wednesday.

A two-year remortgage rose from a rate of 0.89 per cent to 1.04 per cent.

Those looking to fix for five years will pay 1.24 per cent, up from 0.99 per cent.

NatWest’s five-year offer is 1.02 per cent, up from 0.97 per cent. halifax and Santander are now the only lenders still offering five-year fixes below 1 per cent.

Rachel Springall of Moneyfacts said: ‘There is still a plentiful amount of competitively priced mortgage deals out there. Lenders still very much want new business at the moment.’

The bank of mum and dad will have supported nearly half of all first-time buyer purchases this year.

parents are expected to contribute £9.8billion in gifts and loans – an average of just over £58,000 per purchase, according to property group Savills.

It said that over the past ten years, family members have helped nearly 1.4million firsttime buyers.

‘Already seeing fixed rates rise’