Are we witnessing fixed-rate mortgages disappear?

Many financial experts were surprised last week when the Bank of England raised the base rate. The general assumption was that this would probably not occur until at least February or March.

Despite this, several lenders have already announced changes to their SVRs and revised tracker rates.

According to a mortgage analyst at Moneyfacts, this time there is a twist in the tail. According to them, 12 lenders (mostly building societies) have withdrawn either selected fixed-rates or their full fixed-rate range, without offering anything to replace them.

Possible reasons for their actions could be:

a)      an overwhelming surge of customers, desperate to secure ‘cheap’ deals, thus exhausting Building Societies’ trenches of fixed-rate funds.

b)      Building Societies are trying to ‘cash in’ by altering the price of products and in turn gaining a larger profit margin.

Lender	wef	Rates withdrawn
Barnsley BS	11.1.07	5.29% to 31.1.12
Cumberland BS	12.1.07	All fixed rates
Egg (Best Buy Rate)	15.1.07	4.74% for 2 years
Kent Reliance BS	12.1.07	3, 5, 10 year rates
Mansfield BS	12.1.07	All fixed rates
Newbury BS	11.1.07	5.47% to 31.12.11
Portman BS (Best Buy Rates)	15.1.07	All fixed rates
Progressive BS	12.1.07	All fixed rates
Saffron BS	11.1.07	5.85% to 30.11.09
Skipton BS	12.1.07	All fixed rates
Stroud & Swindon BS	12.1.07	5.15% to 28.2.22
Tipton & Coseley BS	12.1.07	All fixed rates

If this course of action continues, short-term, fixed-rates under 5% may disappear, or alternatively as lenders become forced to buy their funds at higher rates, they will in turn have no option but to pass this onto customers in the shape increased fees such as arrangement fees and other similar items.

There are 2 trains of thoughts within the industry:

1)      even though there may be more rate increases throughout 2007, at some point it has to come back down-mustn’t it??

2)      That there will be more increases to come, in which case it is advisable for those who are on a tight budget and maybe could not absorb any further increases to act quickly before the best fixed-rate deals vanish.