Borrowers are advised to lock in a deal now and reassess should conditions improve, says Hina Bhudia, Partner at Knight Frank Finance.
UK mortgage lenders have pulled more than 500 products from the market during the past four weeks as they prepare for interest rates to rise, according to data from Moneyfacts.
Total availability fell to 4,828 in March, from 5,356 a month earlier – the largest drop since May 2020, during the early months of the pandemic. Average two- and five-year fixed rates for all LTVs have increased for the fifth consecutive month, rising by 0.21% and 0.17% respectively.
The Bank of England’s Monetary Policy Committee will decide whether to raise the base rate from its current level of 0.5% at its meeting next Thursday, March 17th. Mortgage rates remain very low compared to historic norms but are likely to rise over the short term, says Hina:
“Pricing in financial markets leaves little doubt that rising mortgage rates, while still attractive, have further to run over the short term. A hike in the base rate at next week's Monetary Policy Committee is highly likely and lenders continue to withdraw products on a daily basis, leaving borrowers with little time to react. Borrowers might discuss a rate with a lender only to call back a day or two later and find it's gone.
"Thankfully borrowers don't have to wait and see. Most mortgage offers are valid for six months, so my advice is to lock in a deal now and then renegotiate should the landscape improve during the weeks and months ahead."
Activity in the mortgage market is picking up as borrowers seek to beat further rises in interest rates. The number of mortgages granted for the purchase of homes surged to 74,000 in January, according to the Bank of England. That’s well above the 12-month pre-pandemic average up to February 2020 of 66,700.
“We expect the data to show another pick up in the coming months,” says Simon Gammon, Managing Partner at Knight Frank Finance. “Many potential buyers opted to wait during the pandemic, whether due to low stock or the uncertain outlook. We’re now seeing large numbers seeking to move before rates rise further.”
If you are looking to secure a mortgage this year and would like to discuss your options, contact our expert mortgaging team who would be happy to help. We have access to over 200 lenders, and can help find a cost-effective mortgage for you.