Final sub-4% mortgage charges are about to fade as Nationwide hikes house mortgage costs AGAIN

Nationwide Building Society looks set to withdraw the final sub-4 per cent fixed rate mortgages from market tomorrow.

Britain’s biggest mutual is increasing rates by up to 0.35 percentage points, which brokers say will leave no fixed rate deals below 4 per cent.

Nationwide’s lowest two-year fix is currently 3.9 per cent. That will rise to 4.2 per cent from tomorrow.

On a £200,000 mortgage being repaid over 25 years that’s the difference between paying £1,045 and £1,078 a month. 

Joining Nationwide in upping its home loan prices is also Virgin Money. Its lowest fixed rate deals will start from 4.37 per cent tomorrow, up from 4.02 per cent today.

On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,057 a month and £1,097 a month.

The changes follow on from Santander and NatWest which today both upped mortgage rates.

Santander has been offering super-cheap sub-3.8 per cent rates but these deal are being withdrawn shortly. 

Royal Bank of Scotland (RBS) has one sub-4 per cent fix but that is likely to go today along with NatWest’s remaining sub-4 per cent rate, according to Aaron Strutt of broker Trinity Financial.

‘It looks like Nationwide is about to pull the last sub-4 per cent mortgage rates from the market which is a shame because pricing had been heading down and there were some great rates to choose from,’ said Strutt.

‘While rates have clearly increased, they are not excessively expensive given that HSBC and Halifax have fixed rates priced just over 4 per cent and the best five-year fixes are only a bit higher. 

‘We are still expecting more rate hikes this week as the cost of funding mortgages has gone up.’

Mortgage rates are essentially rising because the war in the Middle East has stoked inflation fears. 

This is primarily due to soaring oil and gas prices, which push up costs across the economy. 

Traders who had previously been expecting interest rates to be cut this month are now betting on a base rate rise by the Bank of England this year. 

As these expectations feed through to the money markets, it becomes more expensive for lenders to offer mortgages – hence the disappearance of rates below 4 per cent.

Rohit Kohli, director at Romsey-based broker The Mortgage Stop described the ongoing mortgage repricing as ‘exceptional.’ 

‘What we’ve seen in the last seven to ten days makes the Liz Truss period look like a blip,’ said Kohil.

‘The speed, scale and frequency of the rate repricing has been exceptional, and from a broker’s point of view it’s rare to see so many lenders move this quickly and this aggressively in such a short space of time.

‘For borrowers, affordability is being squeezed in real time. First-time buyers are losing ground almost by the day, and those remortgaging are finding that delays now come with a direct cost. 

‘As long as the war keeps driving uncertainty, I expect lenders to stay defensive and rates to keep rising.’

According to Moneyfacts, the average two year mortgage fix on 10 March was 4.93 per cent and today that sits at 5.21 per cent.

On a typical five year home loan, the rate has jumped from 5.03 per cent to 5.26 per cent.  

What should households do? 

Brokers are advising households to lock in a deal now or risk substantially higher monthly repayments. 

Burying your head in the sand and hoping for a quick resolution in the Middle East is the worst way to react, they add.  

HSBC still has a two-year fix from 4.01 per cent and Barclays has two-year fixes from 4.1 per cent. The best five-year fixes are priced from around 4.2 per cent upwards.

‘In a market like this, early planning and decisive action can save money and remove a lot of unnecessary stress.

‘The cheapest deals can often disappear overnight, which makes it important to act quickly if you need a mortgage. 

‘If you take too long to send your forms back to your broker or put off choosing a rate or delay checking the market, you could end up paying a significantly higher rate. 

‘While there have been a lot of rate increases there are still some competitively priced mortgages to choose from.’

Have a mortgage question? editor@thisismoney.co.uk