DEMISE OF THE CHEAP HOME LOAN

Banks axe best deals before interest rate rise

BANKS are withdrawing the last of their supercheap mortgage deals. The move follows a Bank of England warning of an interest rate rise as early as November.

Seven of the country’s biggest names have put up rates on dozens of deals in the past five days – including a 0.99 per cent deal that was the cheapest fix.

Nationwide and the Yorkshire Building Society are among those who have withdrawn their top deals and Halifax will increase a number of its rates on Monday. The cull marks the end of record low rates, with the cost of home loans expected to steadily rise from now on.

A rate rise would mean an instant increase in mortgage bills for many of the 3.7million homeowners on variable rate deals.

Dominik Lipnicki, of broker Your Mortgage Decisions, said: ‘If the

Bank of England increases rates by 0.25 percentage points then you can be sure banks will increase their rates by even more to profit from it.

‘We are already seeing the start of the rate increases and there will definitely be more to come.

‘There are millions of people out there who haven’t acted yet and I worry they will be caught out if they don’t act soon.’

Britain’s 11million mortgage customers have benefited from rock bottom rates since the Bank of England cut its base rate to a record low of 0.5 per cent in the wake of the financial crisis, and then to 0.25 per cent last year.

Around 2.5million homeowners have never experienced a rate rise and every time they have come to remortgage have had access to a host of cheap fixed deals.

Bank governor Mark Carney said yesterday: ‘If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates will increase.’

Earlier this month he said ‘there may need to be some adjustment of interest rates in the coming months’ to control inflation.

Experts are urging the 3.7 million borrowers on variable rate mortgages to act quickly and lock into a fixed rate deal before rates climb higher and all the best deals disappear.

A 0.25 percentage point rate increase would add £259 a year to a typical mortgage bill.

Andrew Montlake, of mortgage broker Coreco, said: ‘It’s getting more expensive to banks to fund fixed rate deals, especially since the Bank of England warned that it could raise interest rates.

‘There is only so long banks can hold out before they have to hike their mortgage rates, so if you’re looking to remortgage then you need to do it quickly.’

Rachel Springall, of financial data firm Moneyfacts.co.uk, said: ‘When you get big lenders pushing up their prices it’s not usually long before others follow suit.’

When the base rate rises banks will follow suit almost immediately with rate hikes of their own.

But the Mail has found that many are already starting to cash in by increasing the cost of their fixed rate deals for new customers.

Seven building societies – Nationwide, Yorkshire, Skipton, Coventry, West Bromwich, Leeds and Newcastle –, have all increased rates or pulled their best deals in the past five days and more mortgage lenders are expected to follow suit.

On Tuesday, Yorkshire pulled its top 0.99 per cent two-year deal after only ten days. It was the cheapest deal on the market for borrowers with a 20 per cent deposit.

The next day Nationwide hiked its rates on eight two-year fixed deals by up to 0.25 percentage points, pushing up the average customer’s mortgage bill by £216 a year.

Lenders claim that they have been forced to raise rates after the cost of funding mortgages soared.

The rate at which banks lend to one another has risen by 50 per cent in the last month alone.