Banks and building societies have withdrawn almost 700 mortgage products from the market as the escalating conflict in Iran fuels concerns over rising UK inflation and interest rates, according to data from Moneyfacts.
On Tuesday morning, only nine fixed-rate deals with rates below 4% remained available, a sharp drop from 490 such deals on March 9. The average two-year fixed rate has risen from 4.83% at the start of March to 5.28%, while the average five-year fix increased from 4.95% to 5.32%.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Borrowers looking for the lowest fixed rates will be disappointed to see the demise of sub-4% mortgages, but they are not sustainable with swap rates increasing.”
Adam French, head of consumer finance at Moneyfacts, warned that borrowers taking out a new deal could face hundreds of pounds more in annual mortgage costs. For a £250,000 mortgage over 25 years, a two-year fix would cost £788 more per year compared to a fortnight ago, while a five-year deal would add £651.
French added: “Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs with 689 fewer mortgage products available since March 9 – almost a tenth of the market. Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave.”
The Bank of England is due to announce its next base rate decision on Thursday, but expectations of a cut have diminished amid the geopolitical tensions.
