Lenders veering away from fixed-rate mortgages
Lenders are preempting a Bank of England (BoE) interest rate rise by starting to withdraw their fixed-rate mortgage products. On Wednesday, the UK inflation rate rose to 3.1%, higher than expected, and a result Alliance & Leicester pulled its fixed-rate offering - with other major mortgage lenders expected to follow suit.
Nicholas Leeming, Director of propertyfinder.com commented:
Once again, the people who will be hit the hardest by the withdrawal of fixed rate packages will be the first time buyers. Affordability constraints are preventing many from getting a foot on the property ladder, and those that are managing to invest in property for the first time are eager to fix their monthly repayments to regulate the outgoings of their already stretched finances.
According to the Council of Mortgage Lenders , 87% of first time buyers are now opting for a fixed rate mortgage, the removal of which may serve to push lower the already declining numbers of first time buyers in the market. We believe that the housing market is already responding to the MPC’s succession of rises, and that the expected rise next month may cause a more rapid adjustment in the market than is required.
Taking mortgage products off the market may promote premature nervousness in the market, preempting the effects the rate rise next month is likely to have on an already cooling market.
