Fixed rates below 4% set to vanish as lenders continue to reprice
NatWest and Nationwide have removed their final fixed-rate mortgage products priced below 4%, leaving only a small number of deals in the market that are still offering rates starting with a three.
From tomorrow, March 17, NatWest’s two-year fixed remortgage for borrowers with at least a 40% deposit will increase from 3.97% to 4.32%. Many of its other products are due to increase by about 35 basis points. Nationwide is also increasing selected fixed rates by up to 0.35%.
“NatWest has pulled its only sub-4% fix and its cheapest two-year fixes now start from 4.32%,” said Aaron Strutt, product director at mortgage broker Trinity Financial. “It looks like Nationwide is about to pull the last sub-4% mortgage rates from the market which is a shame because pricing had been heading down and there were some great rates to choose from.”
A limited range of sub-4% options remains elsewhere on the high street. Santander is still listing two-year fixed rates from 3.78% and three-year fixed rates from 3.83%, though Strutt said they could also be withdrawn today.
The changes come amid renewed volatility in funding costs. Lenders have been adjusting pricing after a sharp rise in gilt yields since the start of the Iran war. On Monday, the benchmark 10-year gilt yield was just under 4.8%, around half a percentage point higher than at the start of the conflict.
Expectations for near-term monetary policy have also shifted. Before the outbreak of hostilities, markets had anticipated the Bank of England would reduce its base rate this week from 3.75% to 3.5%, which is now seen as unlikely, given concerns about inflation pressures linked to higher energy costs.
“There are still lenders offering sub-4% tracker rates which are good for borrowers who like flexibility because they often do not have early repayment charges, plus they are cheaper than the best fixed rates at the moment,” Strutt said.
“We are expecting to see more banks and building societies increase their rates this week so the advice remains clear, if you are on the hunt for a mortgage or you need to remortgage soon, try and lock in a rate as soon as possible. We are not at the stage where mortgages are outrageously expensive, but while the turmoil in the Middle East continues, prices may keep rising.”
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