Sub-1pc mortgage deals will ‘disappear in the next month'

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Homeowners have been urged to take advantage of sub-1pc mortgage rates, as experts believe they will completely disappear in the next month.

Sub-1pc mortgage deals will ‘disappear in the next month’
© Provided by The Telegraph Houses in south London and the skyline of the financial district of the City of London

The Bank of England has hinted heavily at an interest rate rise next month and mortgage lenders have started pulling their cheapest rates from the market.

The number of fixed-rate sub-1pc mortgages has fallen by almost a third in the past two weeks, from 131 to 93, according to data published by financial analysts Moneyfacts.

Samuel Tombs, of consultancy Pantheon Macroeconomics, said more sub-1pc deals were likely to disappear in the next month.

He said: “There has been a rapid reassessment of how quickly rates will rise. Lenders do not have the scope to absorb this, so they will have to pass the cost of a base rate rise on to borrowers.

“It is another unhelpful development for households already facing rising bills, but most people won’t feel the pinch overnight if they are on a fixed-rate deal. And if they locked in to a rate, say, five years ago, when they come to remortgage, the rate won’t be too dissimilar.”

However, borrowers on their lender’s standard variable rate will see an immediate and sharp increase in their mortgage costs. Millions of households are on this rate, including those hit by the cladding crisis and others who are unable to remortgage.

The threat of a rate rise by Threadneedle Street has also spooked buy-to-let lenders. Some deals have already been pushed up by more than one percentage point.

Landlords, like their owner-occupier counterparts, have enjoyed months of price cuts, with the cheapest rate also falling below 1pc for buy-to-let deals.

But Angus Stewart, of broker Property Master, warned the “tide was turning”, adding that banks were increasingly raising their rates and withdrawing mortgages from the market.

This week the Nottingham Building Society pushed up the cost of some of its buy-to-let mortgages by more than one percentage point, with a two-year fix rising from 1.55pc to 2.74pc and a five-year fix jumping from 2pc to 3.06pc.

Chris Sykes of Private Finance, a mortgage broker, said: “In the coming weeks we expect to see larger percentage rate rises in the buy-to-let space due to more conservative lending.”

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