Last of the sub-4% fixed mortgages disappear as HSBC hikes rates

• From tomorrow, HSBC will become the final lender to up its sub-4% deals
• Follows hikes by Santander, TSB and Coventry Building Society earlier this week

Homeowners and buyers looking to bag a sub-4 per cent mortgage rate have until the end of today before they disappear from the market for now. 

From tomorrow, HSBC will become the final lender to pull its sub-4 per cent deals.

The lender has announced it is hiking dozens of fixed rate deals aimed at both existing and new customers who are either buying or remortgaging.

The announcement comes alongside hikes from NatWest today and follows rate increases by Santander, TSB and Coventry Building Society earlier this week.

It means there will no longer be any five-year fixed rates available below 4 per cent – taking us back to where the cheapest deals were in December.

The lowest five-year fix for home buyers and remortgagers will now be 4.04 per cent, courtesy of First Direct.

Many across the mortgage broking industry are concerned that further rate hikes are causing yet further pain and uncertainty for borrowers. 

Gareth Davies, director at South Coast Mortgage Services says: ‘I’m getting well and truly fed up with the volatility of lender rates right now. 

‘We can’t go more than a day or two without things changing, and hikes like these are simply going to knock consumer confidence once again. 

Ken James, director at Contractor Mortgage Services adds: ‘It’s turning into a topsy turvy kind of market place with yet another rate increase from one of the big lenders. 

‘We seem to have returned to the uncertainty and lack of confidence that defined 2023 and this will start to filter though to potential buyers.’

Nicholas Mendes, mortgage technical manager at John Charcol believes HSBC’s latest reprice was inevitable following competitor movements in recent days. 

‘Having the best buy rate over a weekend is risky business, as this would have resulted in being overwhelmed with applications,’ says Mendes.

‘I expect we will have a few weeks of mortgage rates adjustments, as lenders will be busy balancing margin and volume to ensure this latest hiccup in rates doesn’t dampen the new year demand.

HSBC’s latest reprice was inevitable following competitor movements in recent days. ‘Having the best buy rate over a weekend is risky business, as this would have resulted in being overwhelmed with applications. Nicholas Mendes – John Charcol 

‘Sub 4 per cent deals will be off the cards temporarily, but once some positive data feeds back into the market confidence, pricing will slowly edge back down.’

HSBC is also upping its buy-to-let mortgage rates from tomorrow. 

At present the lender is offering some of the best deals for landlords who own or buy under their personal name, rather than via a company.

For example, its best buy two-year fix aimed at a property investor buying with a 25 per cent deposit is currently 4.93 per cent with no fee attached.

Following HSBC’s rate hikes, from tomorrow it is likely that the next best buy for investors with this same situation will be with NatWest charging 5.29 per cent with no fee. 

On a £200,000 interest only mortgage – which landlords typically use –  that’s the difference between paying £821 a month and £882 a month.

Why are lenders upping rates?

Since 1 February, the average two-year fixed rate mortgage has nudged from 5.56 per cent to 5.72 per cent, according to Moneyfacts, and the average five-year fixed rate mortgage has gone from 5.18 per cent to 5.3 per cent. 

The shift upwards has come thanks to a slight change in market expectations around future interest rates. 

Markets now think a Bank of England base rate reduction before June is less likely.

At the start of this year, investors were betting rates could be cut to 3.75 per cent by Christmas.

But it is now forecast that rates will fall to just 4.75 per cent or 4.5 per cent this year – with the first move coming as late as September.

David Hollingworth, associate director at L&C Mortgages says: ‘There has been a large amount of pricing activity with lenders shifting rates regularly to adjust to the fact that markets now anticipate that base rate may take longer to fall than had previously been hoped. 

‘This has forced fixed rates back up as funding costs have risen leading to HSBC being the last lender standing in the sub 4 per cent bracket. 

‘That may catch some borrowers by surprise when the rate story this year has generally been one of falling rates. 

He adds: ‘This could feel like a retrograde step for borrowers but it is a far cry from the very rapid and steep increases that we saw post mini Budget and again last summer. 

‘Market rates aren’t skyrocketing in the same way that would force a sharp and significant rise in borrowing costs but it is enough that lenders are having to adjust in the face of higher funding costs. 

‘I expect there will still be plenty of jockeying for position as the market remains extremely competitive but in the short term we may still see more movement in mortgage rates.’