Last of the sub-4% fixed mortgages disappear as HSBC hikes rates

Homeowners and buyers looking to get a mortgage rate below 4 percent have until the end of today before disappearing from the market for now.

From tomorrow, HSBC will become the latest lender to close its deals below 4 per cent.

The lender has announced it is expanding dozens of fixed rate offers aimed at new and existing customers who are purchasing or remortgaging.

The announcement follows similar increases made by Santander, TSB and Coventry Building Society earlier this week.

This means there will no longer be five-year fixed rates available below 4 per cent, which takes us back to where the cheapest deals were in December.

The lowest five-year fix for homebuyers and remortgaging will now be 4.04 per cent, courtesy of First Direct.

Nicholas Mendes, Mortgage Technical Director at John Charcol, says: ‘HSBC’s latest revaluation was inevitable following competitor moves in recent days.

‘Having the best buying rate over a weekend is a risky business, as this would have resulted in an overload of requests.

‘We should expect to have a few weeks of tightening mortgage rates as lenders will be busy balancing margin and volume to ensure this latest rate setback doesn’t dampen demand in the new year.

“Offers below 4 percent will be temporarily ruled out, but once some positive data impacts market sentiment, prices will slowly fall again.”

HSBC will also increase its buy and let mortgage rates from tomorrow.

Currently, the lender offers some of the best deals for homeowners who own or buy under their personal name, rather than through a company.

For example, its best two-year buyout aimed at a property investor buying with a 25 per cent deposit is currently 4.93 per cent commission-free.

Following HSBC’s rate hikes, from tomorrow the next best buy for investors in the same situation is likely to be NatWest charging 5.29 per cent commission-free.

On a £200,000 interest-only mortgage, which homeowners typically use, that’s the difference between paying £821 a month and £882 a month.

Why are lenders raising rates?

Since February 1, the average two-year fixed-rate mortgage has gone from 5.56 percent to 5.72 percent, according to Moneyfacts, and the average five-year fixed-rate mortgage has gone from 5.18 percent. cent to 5.3 percent.

The upward shift has occurred thanks to a slight change in market expectations regarding future interest rates.

Markets now think a Bank of England base rate cut before June is less likely.

Earlier this year, investors were betting that rates could be cut to 3.75 percent by Christmas.

But rates are now forecast to fall to just 4.75 percent or 4.5 percent this year, with the first move coming in September.

David Hollingworth, associate director at L&C Mortgages, says: “There has been a lot of pricing activity and lenders are changing rates regularly to adapt to the fact that markets now anticipate that the base rate may take longer to fall than what was previously expected.

‘This has forced fixed rates to rise again as funding costs have risen, leading to HSBC being the last lender in the sub-4 per cent range.

‘That may take some borrowers by surprise when the rate story this year has generally been one of falling rates.

He adds: ‘This might seem like a retrograde step for borrowers, but it is a far cry from the very rapid and sharp increases we saw after the mini-budget and again last summer.

‘Market rates are not soaring in the same way that would force a sharp and significant increase in borrowing costs, but it is enough that lenders have to adapt to higher financing costs.

“I expect there will still be a lot of jockeying to position as the market remains extremely competitive, but in the short term we may still see more movement in mortgage rates.”