MORE low-cost mortgages vanish as Barclays and NatWest hike charges for second time in every week

Mortgage rates continue to rise on a daily basis, leaving home buyers and those remortgaging in a race to secure a deal below 4 per cent before they disappear. 

Barclays and NatWest will raise rates tomorrow, 13 March, both for the second time in a week. 

NatWest is increasing rates by up to 0.35 percentage points while Barclays is raising rates by 0.3 percentage points.

The changes by Barclays will mean all its fixed rates will be above 4 per cent. 

Today, its lowest rate for people remortgaging as of today is a two-year fix at 3.86 per cent with a £999 fee. That will rise to 4.16 per cent from tomorrow. 

On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,040 a month and £1,073 a month. 

NatWest will increase its lowest two-year fixed rate mortgage rate from 3.72 per cent to 3.97 per cent. The product comes with a £1,495 fee.

Someone buying with a 40 per cent deposit can currently secure a £200,000 mortgage with a 25 year repayment term and pay £1,025 a month. From tomorrow that will rise to £1,052 a month.

Hina Bhudia, partner at mortgage adviser Knight Frank Finance, said: ‘This is a real blow to borrowers, who could access deals just above 3.5 per cent only a month ago.

‘There are still a handful of sub-4 per cent fixed rate deals available, but they are likely on borrowed time.’

Why are mortgage rates still rising?

More than 25 of Britain’s biggest lenders have hiked the rates on their fixed home loans as the war in the Middle East fuels inflation across the world.

The cost of borrowing had been inching lower over the past year as the Bank of England repeatedly cut the base rate of interest. 

But this downward trend has slammed into reverse over the past two weeks. In the past 48 hours alone, almost 500 mortgage products have been withdrawn from the market, according to rates scrutineer Moneyfacts.

Banks are responding to expectations of fewer interest rate cuts by the Bank of England, or perhaps even rates rising, due to the increased risk of inflation.

Inflation could rise in part due to energy bills, which might go up because of disruption in oil and gas supplies.

Oil prices hit $100 a barrel again this morning, as three more cargo ships were attacked in the Gulf. 

Sonia swap rates, the inter-bank lending rate on which banks base the price of their fixed mortgages, have spiked upwards since the conflict in the Middle East began. 

Two-year swaps are currently at 3.83 per cent, up from 3.36 per cent on 27 February.

Meanwhile, five-year swaps hit 3.94 per cent yesterday, up from 3.41 per cent on 27 February.

As a result, it is likely we will see mortgage rates continue to rise over the coming weeks, rather than fall.

Martin Rayner, director at mortgage broker Compton Financial Services, explained why rising swap rates are negative for borrowers.

‘Rising swap rates lead to higher mortgage rates and also signal that markets expect interest rates to stay higher for longer, which can reduce affordability for borrowers and increase borrowing costs for businesses, potentially slowing housing activity and wider economic growth.

‘Markets are becoming less confident that interest rates will fall soon, with geopolitical tensions and inflation risks pushing expectations towards rates staying higher for longer.’