Home Money Sub-4% mortgage rates ‘could disappear this week’ as Santander announces hikes

Sub-4% mortgage rates ‘could disappear this week’ as Santander announces hikes

by Elijah
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On the rise: Santander has become the latest mortgage lender to announce rate hikes

The cheapest mortgage rates look set to rise above 4 per cent again, after Santander announced it will raise rates from tomorrow.

Santander increases all its standard residential fixed rates between 0.23 and 0.34 percentage points.

So homeowners looking to remortgage will have until the end of today to get Santander’s five-year fixed rate of 3.99 per cent, with a £999 fee attached.

It is available to those who remortgage with at least 40 percent of their home equity.

On the rise: Santander has become the latest mortgage lender to announce rate hikes

Stock-rich homeowners looking for the market-leading two-year solution could previously get 4.39 per cent with Santander.

But now the cheapest deal available to them will jump to 4.52 per cent, with Halifax.

On a £200,000 mortgage repaid over 20 years, that’s the difference between paying £1,253 and £1,267 a month – a saving of £336 over two years.

The changes will also leave HSBC the only mortgage lender in the market offering a five-year residential fixed rate below 4 per cent.

HSBC’s cheapest five-year solution, reserved for those buying with at least a 40 per cent deposit or remortgaging with at least 40 per cent equity, charges 3.99 per cent.

However, mortgage brokers expect HSBC’s market-leading rates will not hold for long.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘HSBC will be the latest player in the sub-4 per cent five-year bond market once Santander has repriced higher.

‘As borrowers inevitably turn to HSBC for the best deal on the market, the lender will want to ensure its service levels are preserved, so we would expect it to raise its prices over the weekend as well.

Chris Sykes, chief technical officer at Private Finance, adds: “I think we could well see sub-4 per cent rates disappear this week.”

Until the beginning of this month, mortgage rates were on a downward trajectory. In January alone, more than 50 lenders cut their residential rates.

However, rates now appear to have risen again. Since February 1, the two-year average rate has risen from 5.56 to 5.7 percent, according to Moneyfacts.

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.

Mortgage brokers are urging anyone nearing the end of their current deal, or those with a tracker or standard variable rate, to consider fixing it now.

Sykes said: “We have advised some customers to fix the issue now as we may have seen the bottom of the rates for a while.”

Nicholas Mendes, mortgage technical director at broker John Charcol, added: “Given the nature of the market, those who may be hesitant to commit to a deal should act quickly.”

Mortgage expert: Chris Sykes thinks we could well see sub-4% rates disappear this week

Mortgage expert: Chris Sykes thinks we could well see sub-4% rates disappear this week

“While we anticipate a reduction in fixed rates, the timetable for this adjustment may be somewhat longer than initially expected.”

Mark Harris adds: ‘If borrowers see a rate they like, they would do well to get it without delay for peace of mind. When they come to collect the product, if the prices have dropped again, they can opt for a cheaper price.’

Market expectations and mortgage prices are reflected in Sonia’s swap rates. At the beginning of the year, two-year swaps were at 4.04 percent and five-year swaps were at 3.4 percent.

As of February 20, two-year swaps had risen 4.52 percent and five-year swaps were at 3.96 percent.

Some mortgage brokers believe it could be some time before we see rates below 4 per cent reappear, perhaps not until the Bank of England starts cutting the base rate.

“I think it depends on the upcoming inflation figures and the MPC,” says Sykes. “But I don’t think we’ll see rates below 4 percent again until the Monetary Policy Committee reduces the base rate.”

Mark Harris adds: ‘We are in a period of price volatility, due to rising swap rates, which underpin the establishment of fixed rate mortgages.

‘All eyes will be on the upcoming economic data as this will determine where prices go in the coming months.

“Once the MPC’s intentions are better understood, markets could react quickly and cheaper prices could return.”

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