It is those shorter-dated yields that feed most directly into mortgage pricing, with five-year swap rates rising from 4.35% to 4.7% over the past month and two-year swap rates moving from 4.25% to 4.59%. Fixed mortgage rates, which are priced off swap rates that move closely with gilt yields, followed suit.
Sub-5% deals effectively wiped out
The consequences for product availability have been severe. The number of fixed rate deals priced below 5% fell by 99% during September – from 1,494 at the start of the month to just nine today, excluding products available exclusively for lending in Northern Ireland. Including those products, the number fell from 1,691 to 107. Combined with a modest contraction in sub-5% variable deals, the market has lost approximately 1,610 mortgage options priced below 5% since 1 September.
Rachel Springall, finance expert at Moneyfacts, said the pace of repricing had been driven by structural pressures. “The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility,” she said. “As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable. The impact on sub-5% fixed mortgages has been brutal, with around 1,500 deals priced below 5% vanishing since the start of September.”
The biggest high street lenders have moved repeatedly and in close succession. Barclays raised selected fixed rates on four separate occasions during the month. HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
Springall was direct about what this means for borrowers. “Borrowers who were hoping mortgage rates would stabilise will be disappointed,” she said. “There have been some reductions along the way, but these have done little to offset the broader upward pressure on mortgage pricing.”
