The mortgage market signals flashed red again yesterday as one of the biggest lenders, Abbey, reversed last week's cuts on its core fixed-rate mortgages.
The mortgage market signals flashed red again yesterday as one of the biggest lenders, Abbey, reversed last week's cuts on its core fixed-rate mortgages.
The hiking of rates by up to 0.44% came just a week after the bank cut the same rates in an attempt to lure borrowers from rivals. Mortgage broker John Charcol commented: "It looks as if we are about to see another round of price increases from lenders, with Abbey leading the way."
Abbey said that it was responding to a "dramatic increase" in interest rate swaps last week, when hopes of a further rate cut were dampened by the Bank of England's bearish prognosis on UK economic prospects.
The swaps are a derivative contract whose moves broadly reflect changes in interest rate expectations.
Abbey said its core five-year fixed rate for borrowers on 75% loan to value deals, which it cut by 0.17% last week, had been lifted by 0.44% to 6.19%.
A spokesman said: "Because we cut rates last week, even with these increases our fixed rate deals are still competitive."
The bank said it had separately brought in new tracker rate deals, and held rates on other tracker and flexible mortgage products.
Abbey has said since early this year that it plans to cut rates to attract new borrowers, with some rivals retrenching in the face of a deteriorating outlook.
It took an almost 16% share of the UK mortgage market in the first quarter, almost double the previous quarter, in contrast with rivals such as building society Nationwide, which last week promised to restrict new lending business to the amount it can fund from its savings inflows.
Louise Cuming, head of mortgages at price comparison site moneysupermarket.com said: "While swap rates have risen by around 0.5% in the past month which could justify this hike, Abbey is only adding to confusion and volatility by reducing rates on fixed deals last week only to raise them again this week."
She added: "Borrowers need to be regaining trust in providers and the housing market as a whole, or we will face the unwanted prospect of further market stagnation."
Meanwhile information group Moneyfacts said separately that the average shelf life of a mortgage deal was down from 30 days a year ago to just 11 days.
Darren Cook at Moneyfacts said: "Last year, there were over 15,000 mortgage products on offer and customers were spoilt for choice: providers kept their mortgages on their books on average for 30 days at a time. Now there are just 3814 products available. Last month when bank base rate fell by 0.25%, new deals came and went within a staggering six days."
He added: "This news is not encouraging for the 1.4 million individuals who are expected to remortgage their homes this year, when their existing short-term fixed-rate deals expire. Unfortunately, until the current market readjustment is complete, the ability to time the mortgage market has become more of a lottery than an art, with the majority of today's better deals expected to have disappeared by this time next week."
