You might have seen headlines recently about mortgage rates dropping below 4% – but these table-topping deals don’t always stick around for long.
Data from Moneyfacts shows that mortgages stay on the market for an average of four weeks before being withdrawn or having their rate changed. However, we’ve recently seen some of the cheapest deals disappearing much more quickly.
Read on to find out why eye-catching offers don’t always last and for our analysis of which providers consistently offer competitive rates.
How long do top mortgage deals last?
Last month, Santander became the first bank to bring back sub-4% mortgages, offering two and five-year fixed-rate mortgages for borrowers with a 40% deposit.
However, the five-year deal was withdrawn less than two weeks later, with the two-year deal following earlier this week.
We analysed fixed-rate mortgages that featured in our best-rate tables over a four week period to assess how long the top offers lasted.
Over the four weeks, 12% of deals were either withdrawn or had their rate increased. NatWest and Halifax chopped and changed their mortgages most quickly, with both offering a leading rate for just four days.
Why do deals disappear?
We asked David Hollingworth of the broker L&C mortgages why lenders sometimes pull their best-rate deals.
Funding issues
‘A lender may have a certain amount of funding available to offer a deal at a particular rate. As those funds are used, they will have to decide whether they can or want to maintain that deal.
‘If the cost of funding is shifting in the background, the lender may be forced to change the rate, as they simply can’t manage to price the rate as sharply.
‘As new data feeds through, market expectations for interest rates will move, which ultimately has an impact on the rates offered by lenders.’
Pressure on service
‘If a deal is sitting at the top of the best buy charts, this will attract more customers. As well as using up funding more quickly, it can pile the pressure on the lender’s service as a flood of business comes in.
‘In many cases, lenders will want to avoid reaching the point where their processing and service takes a hit – holding a competitive rate in the market for too long could take time to recover from.
‘As a result, lenders may reprice their rates to ease off the gas and protect their service level, preventing them from becoming a victim of their own success.’
Which providers frequently offer top rates?
We also examined which providers consistently appear in our best fixed-rate mortgage tables.
First Direct appeared most frequently in February, with an impressive 44 deals. Yorkshire Building Society was second, with 31 deals in our tables.
Newcastle Building Society, the 56th largest mortgage provider in the UK according to UK Finance, punched well above its weight, ranking fourth.
Overall, 16 different mortgage providers featured in our best rate tables during February, as shown in the table below.
Number of fixed-rate mortgage deals found in our best rate tables between 27 January and and 28 February. Data collected from Moneyfacts
- Find out more: best mortgage lenders
What’s happening to mortgage fees?
When comparing mortgages, you’re bound to be drawn in by the cheapest initial rate. However, it’s also important to factor in other costs, such as upfront fees.
In some instances, a fee-free deal with a higher interest rate can work out cheaper in the long run.
Data from Moneyfacts shows the average mortgage fee has decreased slightly in the last year, dropping from £1,138 to £1,129. However, this remains higher than five years ago, when it stood at £1,040.
The proportion of mortgage deals with no upfront fee has risen slightly from 35% to 36% over the last 12 months.
The impact of fees on overall cost
Nicholas Mendes of the mortgage broker John Charcol explains:
‘A lower interest rate might grab attention, but borrowers need to consider the overall cost of the mortgage over the fixed period. For example, looking at the best current five-year fixed remortgage deals at 60% loan-to-value:
- HSBC: 4.05% with a £999 fee
- Nationwide: 3.99% with a £1,499 fee
‘At first glance, Nationwide’s lower rate seems like the better deal. However, when factoring in total costs over five years — including repayments and fees — HSBC actually works out £102 cheaper.
- Total cost with HSBC: £64,671
- Total cost with Nationwide: £64,773
‘This is a great example of why headline rates don’t tell the full story. As the market continues to shift, borrowers should focus on the full cost of a deal to make sure they’re getting the best possible mortgage for their circumstances.’
What to consider when choosing a fixed term
When deciding how long to fix your mortgage for, it’s important to consider your appetite for risk.
If you’re confident that mortgage rates will drop in the coming years, a two-year fix will allow you to secure a new deal sooner.
However, if you prioritise stability and want protection from market fluctuations, a longer-term fix of five years or more may be the better option.
It’s also worth considering whether you’re likely to move home in the next few years. Longer-term fixes often come with early repayment charges, which can make switching or moving more expensive.
Most lenders allow you to ‘port’ your mortgage to a new property, but this isn’t always cost-effective and may require you to meet specific criteria.
You can find more advice in our recent story on choosing a fixed term.
