Lenders axe fixed rates

Leading mortgage providers this week began withdrawing cheap fixed-rate deals, in a sign that interest rates may be on the march up.

Mortgage broker Charcol says the cheap deals "are dropping like flies" after an unexpected rise in inflation to 3.2% saw money market rates rise for the first time in several months.

The Woolwich was one of the first to remove all of its fixes. It has raised its two-year fixed rate from 3.59% to 3.99%, a 0.4% increase. And the five-year fix at 4.24% is under review.

A spokesman says: "The current rates were unsustainable. We move in line with the markets, and they have gone up this week along with inflation. This has caused an increase in the fixed rate."

National Counties also closed its 3.75% and 3.89% fixes this week after being on the market for only a month. Chief executive John Milton says: "With the global uncertainty we're not going to have another fixed rate. We are looking into launching a base rate tracker."

Other high street lenders are also culling their deals. Bristol & West has dropped its 4.25% five-year fix, Bank of Ireland has withdrawn its 4.19% deal, Lambeth abandoned its 3.95% fix and C&G has pulled all its fixed rates.

So is this the end of cheap loans for borrowers? Mortgage expert Ray Boulger from Charcol says not. "The short term rise in swap [money market] rates has been quite staggering - but there doesn't seem to be any change in the medium to long term. This means rates will go up, but they are likely to come down again in the future. People are just reacting to the war - which I don't think is going to be a major problem."

He says it makes sense for people to act fast if they want to get the last of the bargains on the market. Charcol has a five-year fixed rate at 3.85% (which runs to 31/3/08) available until March 31. The next best fixed-rate deals come from Alliance & Leicester and Stroud & Swindon, which have five-year fixes at 4.25% and 4.39% respectively.