Santander is set to pull its cheapest five-year mortgage deal after Wednesday’s higher-than-expected inflation reading.
The bank is removing its 3.99 per cent fix from the market as of Friday (22 February) at 10pm.
It only launched the deal last week, but experts had warned it may not be around for long.
And those warnings intensified on Wednesday after inflation rose to 3 per cent and swap rates – which are used by lenders to price their mortgages – rose.
Santander’s 3.99 per cent two-year fix – the cheapest on the market – is still available for now.
For customers wanting a five-year fix, the best deal is from Barclays, which is also priced at 3.99 per cent.
Aaron Strutt of Trinity Financial said: “Santander has been receiving a huge amount of applications for its sub-4 per cent rates and given the rise in funding costs over the last couple of days, it was only a matter of time until the bank was going to withdraw some of its products.
“Swap rates have gone up since the inflation figures and the other lenders have not followed Santander by launching similar deals. This means there was always going to be additional pressure on the bank.”
Mr Strutt said further hikes may be ahead.
“I suspect some fixed rates will edge up and we will have to wait a while for them to come down,” he added.
David Hollingworth, associate director at L&C Mortgages said: “Yesterday’s news of the increase in the rate of inflation meant that some of the lowest fixed mortgage rates on the market could be under threat.
“That hasn’t taken long to feed through. Co-operative Bank has also announced that it will temporarily withdraw some of its fixed rates from close of play tomorrow.
“Although the movement in swap rates has not been enormous it does look to be enough to put some of the very lowest rates in peril. It’s not a need for panic but borrowers that have been considering a new deal may want to reach a decision sooner rather than later in case of more movement in rates.”
Inflation rose from 2.5 to 3 per cent, according to figures released by the Office for National Statistics (ONS) on Wednesday, a bigger jump than economists had forecast.
Higher inflation means the Bank of England could consider keeping interest rates higher for longer, with traders betting there is little chance that it will cut rates in March.
And experts said that this, coupled with higher-than-expected wage growth in figures released on Tuesday, could mean the best deals on the mortgage market start to disappear and cheaper ones do not appear as quickly.
However, some providers are still cutting rates.
Nationwide said that as of Friday, it’s reducing selected fixed rates by 0.33 per cent whilst Halifax is also cutting rates by 0.2 per cent.
In order to ensure getting best rate, homeowners and first time buyers are encouraged to consult a broker.
If your mortgage fix is coming to an end soon, it is worth starting to look at new deals around three months in advance.
Most lenders let you lock in a new deal several months before you need it to start, so you could currently lock in a rate now even if your deal ends in May.
Then, if rates rise, you have a cheaper deal locked in, and if rates do end up going down, you can switch to a cheaper deal.
Another option is to go for a tracker mortgage, which will go down if the Bank of England base rate does, and up if the Bank raises rates.
These are usually more expensive than fixes, but they do allow customers to bide their time before locking in a fix, which may get cheaper in the future.
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