Santander has become the latest major bank to temporarily pull its mortgage deals for new borrowers from sale, amid a fresh warning that further interest rate hikes may be needed to tackle inflation.
Days after HSBC temporarily pulled down the shutters, Santander said it would stop accepting new applications for its “new business” residential and buy-to-let fixed and tracker rates at 7.30pm on Monday, with deals not becoming available again until Wednesday 14 June.
It came as NatWest put up the rates on some of its new buy-to-let mortgage deals by as much as 1.57 percentage points overnight. The blow to landlords means a two-year fixed deal priced at 5.22% on Monday will cost 6.79% on Tuesday. One broker suggested the move “could sound the death knell for buy-to-let, at least with NatWest”.
Banks and building societies are continuing to pull home loans, often with very little notice, and raise the cost of their fixed-rate deals. However, in more positive news for borrowers, TSB will on Tuesday reduce the cost of some of its new deals by up to 0.4 percentage points.
The average rate on a new two-year fixed mortgage has continued to creep up and stood at 5.86% on Monday, according to the financial data provider Moneyfacts, compared with 5.79% last Wednesday, and 5.26% at the start of May.
However, during the last few days the number of residential mortgage deals available have been climbing: on Monday it stood at 4,952 – up from 4,597 last Wednesday.
The race to reprice deals upwards follows a smaller-than-expected drop in the latest UK inflation data, which led markets to bet that the Bank of England would raise interest rates above 5% by the end of the year.
On Monday there was a fresh warning that the Bank may need to increase the base rate further, despite mounting pressure on households from the rising cost of borrowing.
Jonathan Haskel, an external member of the rate-setting monetary policy committee (MPC), said the central bank could not rule out more hikes given concerns about stubbornly high rates of inflation.
The Bank has raised interest rates 12 times in succession since December 2021, from a record low of 0.1% to 4.5%.
A Santander spokesperson said that it continually reviewed its products in light of “changing market conditions”, adding: “We will not be accepting new applications … from this evening. Our product transfer range remains fully available, and customers who have already applied will not be impacted.”
NatWest has upped the cost of many of its new deals with effect from Tuesday, and while many of its standard deals will see smaller – though still unwelcome – increases of 0.2 percentage points, some its buy-to-let deals will now be much pricier.
Rate increases of up to 1.57 percentage points shocked some in the mortgage sector. Riz Malik at R3 Mortgages said: “The considerable rise in mortgage rates on buy-to-let properties underlines the flux in the market at present and introduces yet more hardship and pain for numerous landlords. This is a significant blow for the entire UK buy-to-let market.”
Lewis Shaw at Riverside Mortgages said: “I’m no longer sure what level of reality I’m meant to be operating on. This could sound the death knell for buy-to-let, at least with NatWest … something has clearly spooked the money markets.”
Meanwhile, TSB said that on Tuesday it would be reducing rates on selected two- and five-year deals by up to 0.4 percentage points across its residential and buy-to-let ranges. This may indicate it had priced its deals at higher than the market average.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said money market swap rates “have continued to see a steady increase, with no sign of falling, which is pushing lenders to continue to reprice”.
He added: “Last week Halifax and HSBC increased their fixed rates, with rates near or over 5% depending on the LTV [loan-to-value]. The pressure is on for homeowners to ensure they are quick to secure a rate if they are approaching the end of the their fixed rate or in the midst of a purchase application.”
HSBC had said about lunchtime on Thursday last week that it would withdraw all its new business residential and buy-to-let products at 5pm that day, with deals becoming available again on Monday. However, about three hours later, in a sign of the fast-moving and chaotic market conditions, the bank said that “due to significant demand”, it would be removing the products from sale with immediate effect.
Some mortgage brokers complained they had been sitting in a queue, unable to get through to HSBC, for more than an hour until they received the updated notification.
