Rate fears prompt best-buy mortgage withdrawal
Thursday, 19 Apr 2007 15:36
Lenders are withdrawing their best-buy products
Lenders are beginning to withdraw fixed-rate mortgages as fears grow that the Bank of England will raise interest rates next month.
Earlier this week official figures revealed that inflation in Britain had increased faster than expected to hit 3.1 per cent.
And as the Bank's governor writes to chancellor Gordon Brown to explain why consumer price index (CPI) inflation is 1.1 per cent above the government's target, mortgage providers are pulling their best-buy mortgage deals.
Yesterday Alliance and Leicester withdrew its fixed-rated products, building societies Skipton and Newcastle have pulled theirs today and Nationwide says it is reviewing its best-buy mortgages.
Fixed-rate mortgages make up the bulk of the first-time buyer market as they can protect homebuyers against interest rate rises.
Base interest rates are currently at 5.25 per cent, having remained unchanged since January's shock quarter-of-a-per-cent rise.
However, economists say that a half-a-per-cent increase decision from the Bank's monetary policy committee (MPC) could not be ruled out next month.