Sub 4% mortgages returned to the market just over a week ago after a three month absence, when Santander UK announced that it was launching a range of two- and five-year fixed rate deals at 3.99%.
Santander’s move, which came about as a result of swap rates falling, coupled with a cut to bank base rate, led to the welcome introductory of further sub 4% mortgage deals by other lenders.
But Santander notified brokers yesterday that from 10pm today, it will be removing its headline grabbing 3.99% five-year, fixed-rate mortgage products.
It said the decision has followed an increase in five-year swap rates across the past week.
It means that a 60% loan-to-value, five-year, fixed-rate at 3.99% for home buyers and five-year, fixed-rate deal at 60% LTV for homeowners looking to remortgage, at 3.99%, will be withdrawn from sale.
Mortgage experts suggested this week that deals below 4% may be short-lived, following stronger-than-expected inflation data.
Figures released by the Office for National Statistics (ONS) on Wednesday showed that the rate of Consumer Prices Index (CPI) inflation rose to 3% in January, from 2.5% in December. Analysts had predicted a 2.8% increase.
“Santander is keeping its 3.99% two-year fix and Barclays still has the 3.99% five-year rate although they may not be around much longer.
“There is still time to secure Santander’s best buy deal but borrowers will need to be quick.”
Despite the higher-than-expected inflation data, Santander said its forecasts are still pointing to further Bank of England base rate cuts this year. Markets are actually pricing in two more rate reductions in 2025.
David Hollingworth, associate director at L&C Mortgages, said: “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, and Santander has announced that it will be withdrawing its five-year fix at 3.99% at the end of tomorrow, citing an increase in market rates as the driver. Its two-year, 3.99% fixed rate will remain in place.
“Co-operative Bank has also announced that it will temporarily withdraw some of its fixed rates from close of play tomorrow.”
Hollingworth continued: “It’s not all bad news. Barclays has managed to find room for improvement in its existing customer products and both Nationwide Building Society and Halifax have just announced their intent to cut rates from tomorrow.
“Although the movement in swap rates, which are a key indicator for fixed mortgage 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.
“The constant shift in mortgage rates can be frustrating but the good news is that the longer-term expectation for Bank of England base rate is that it will continue downwards as the year progresses. What we don’t know is when it will next fall and how far.”
Nationwide Building Society said that, from Friday, it will cutting rates by up to 0.33%, with its rates now starting from 4.09%.
The new rates include a five-year, fixed-rate at 60% LTV with a £1,499 fee with a rate of 4.09%, having been reduced by 0.05% percentage points.
Carlo Pileggi, Nationwide’s senior manager – mortgages, commented: “These latest reductions bring five-year and two-year fixed rates closer together.”
