It comes as Santander becomes the latest big lender to withdraw deals due to market turbulence.
Image source, Getty ImagesBorrowers are being warned mortgage rates are set to rise further as turbulence continues to hit the market.
Broker London & Country said lenders had been withdrawing deals and raising rates at a “relentless pace” and this week would “bring more of the same”.
Mortgage rates have gone up about 0.5 percentage points in the last month to approach an average fixed deal of 6%.
On Monday Santander became the latest big lender to temporarily withdraw new deals due to “market conditions”.
Last week, HSBC also took deals for new customers off the market but temporarily reopened them on Friday.
About 1.5 million households are set to come off fixed mortgage deals this year and face a sharp rise in their monthly repayments.
Rates have been rising since recent data showed that UK inflation is not coming down as quickly as expected.
There have been predictions that the Bank of England will raise interest rates higher than previously thought, from their current 4.5% to as high as 5.5%.
It has a direct impact on mortgage lenders, many of whom have raised rates and taken deals off the market over the last few weeks.
In the latest move, Santander said it was “temporarily withdrawing all our new business residential and buy-to-let fixed and tracker rates at 7.30pm on Monday 12 June”.
“We’re relaunching our full new business range on Wednesday 14 June,” it added.
Mr Hollingworth told BBC Radio 4’s Today programme: “It’s been pretty relentless for the last couple of weeks. We’re back to that phase of you can’t hang around if you are looking at a fixed rate.”
He said lenders were being forced to reprice deals as the market shifted around them and those with cheaper deals faced a “tidal wave” of business.
“Unfortunately I think this week we may still have to see more of that happening.
“But hopefully those rates will just start to find a level and we’ll see things start to calm down in the near future.”
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According to financial data firm Moneyfacts, the average two-year fixed-rate mortgage deal is 5.86%, while a five-year deal has hit 5.51%.
Last May they were 3.03% and 3.17% respectively, meaning many households have seen sharp rises in their borrowing costs.
When a fixed term comes to an end then a borrower reverts automatically to their lender’s standard variable rate (SVR). But brokers say these SVRs have soared, meaning anyone who adopts a wait and see approach would see a massive jump in the rate they pay, and therefore a much higher monthly mortgage bill.
Ian Stuart, boss of HSBC in the UK, admitted it was a “deeply concerning” time for a lot of customers.
“If you’ve got an old rate, as many will have, let’s say 1.5%, and you’re going to come off that rate and go onto something like 5%, that is a big impact on your monthly budget.”
He said the bank had been forced to pause sales of new deals last week as it was struggling to meet “unprecedented” demand.
He also said HSBC expected UK interest rates to rise further, putting more pressure on the market.
“So not the news mortgagees would be looking for, but I don’t think inflation is going to fall quite as fast as we had hoped.”
Rising mortgage rates are also putting pressure on landlords, pushing some to consider selling up, surveyors say.
In turn, that could further squeeze the availability of rental properties and raise costs for tenants, according to the Royal Institution of Chartered Surveyors.