Some sub-4% mortgage deals will disappear from the market from Friday, when Santander UK pulls some products from sale just over a week after they launched, amid changing market conditions.
The bank notified brokers on Thursday that from 10pm on February 21, it will be removing its 3.99% five-year, fixed-rate mortgage products.
It said the decision has followed an increase in five-year swap rates, which are used by lenders to price mortgages, 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3.99% for home buyers and five-year, fixed-rate deal at 60% LTV for homeowners looking to remortgage, at 3.99%, will be withdrawn from sale.
Santander will continue to offer two-year, fixed-rate mortgages at 3.99%, both to home buyers and those looking to re-mortgage. These deals also require a 40% deposit or equity.
The sub-4% deals were launched onto the market by Santander UK on Thursday last week.
On Wednesday this week, mortgage experts suggested 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.
Despite the higher-than-expected inflation data, Santander said its forecasts are still pointing to further Bank of England base rate cuts this year.
David Hollingworth, associate director at L&C Mortgages, said: “Yesterday’s 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.”
Mr 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 reduce rates by up to 0.33 percentage points, 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, said: “These latest reductions bring five-year and two-year fixed rates closer together.”
