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Gloucestershire Business News

Interest rate worries shrink mortgage options

UK banks and building societies have scrapped just under 800 residential and buy-to-let mortgage deals within the past few days as the industry braces itself for anicipated interest rate rises.

According to industry data provider Moneyfacts, the number of options for residential buyers seeking to borrow has dropped by almost 7% in a week as markets.

The industry move came in reaction to last Wednesday's inflation data, given markets betting that the Bank of England will raise the cost of borrowing to more than 5% this year.

Prominent providers who have pulled their deals include Halifax, Newcastle Building Society and MPowered Mortgages, while buy-to-let options have also been hit.

Since the start of last week, the data shows:

● Residential mortgages fell by almost 7% from 5,385 deals to 5,012.

● Buy-to-let mortgages decreased by 14% from 2,748 deals to 2,343.

Rachel Springall, financial expert at Moneyfacts said: "Since last week almost 7% of mortgages have been withdrawn from market. Over the past few days, we have seen a few lenders withdraw selected fixed mortgages from the market, at least temporarily."

Volatility was down to concerns surrounding future interest rate hikes, and lenders are reassessing their propositions, she said, with fresh concerns over potential further interest rate hikes surfacing last week when the Office for National Statistics (ONS) released its latest inflation figures for April. Despite reporting a drop in inflation, core inflation increased and food prices remain stubbornly high.

"As a result, there are fresh concerns that the Bank of England may not be at the end of its rate hike cycle. This concern has fed into the price of mortgages, with swap rates also increasing."

Currently consumers looking to refinance will find rates around 5% on average for a fixed deal, compared to around 3% a year ago.

Mortgage rates have also risen, the average rate on a two-year fixed deal now standing at 5.38%, while the average rate on a five-year fixed is 5.05%.

Both figures are higher than they were last May, when two-year and five-year fixed rates stood at 3.03% and 3.17%.

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