Following swap rates reaching 5 per cent, their highest level in 13 months, some lenders have pulled their fixed rate deals, prompting brokers and lenders to proclaim the end of competitive fixed rate deals.
A number of lenders, including Nationwide and Chelsea, have all recently made changes to their product ranges, following swap rate movement. Andy Gray, head of Woolwich mortgages, said: “Rapidly increasing swap rates, pushed higher by a view that BBR will rise this year, are having the effect of making fixed rate products increasingly expensive to put together, making the rates uncompetitive.”
Ian Giles, head of marketing at Kensington Mortgages, added: “Something has been developing for the past two to three weeks. It was a really quick turnaround as market sentiment this year has generally been that interest rates will drop. Swap rates have gone up 50 basis points, which indicates that the market is catering for two Base Rate increases in the next two to three years. We are currently looking at the market to see if we need to increase the cost of our fixed rate mortgages and, if so, when and by how much.”
Peter O’ Donovan, mortgage manager at Bestinvest, commented: “We now think that Base Rates will go up, rather than earlier industry predictions of a fall and this could happen in the next couple of months. There is a big difference in tracker and fixed rate deals available, up to 0.25 per cent, so lenders are building rate increases into their offers. The next set of inflation and employment figures could be very important to see where the market is heading. ”
