Mortgages vanishing at record speeds: Typical deal now exists for just EIGHT days as lenders rush to raise rates on Iran conflict

People seeking a new mortgage are finding the best deals are vanishing in a matter of days, as lenders pull them from the market or increase the rate. 

The average shelf-life of a mortgage product has plummeted to just eight days, according to Moneyfacts, down from 33 days at the start of February.

Market turmoil caused by the conflict in the Middle East has resulted in lenders removing deals from the market at short notice.

Many banks and building societies have raised rates in recent weeks amid fears over a rebound in inflation and uncertainty over the future path of interest rates.

The eight day shelf-life of a mortgage is the lowest recorded since November 2011, when Moneyfacts first began monitoring the length of time mortgage deals were on the market.

The previous lowest average lifespan of a mortgage was in July 2023, at 12 days. 

The average shelf-life is also now lower than what it was at the start of October 2022 (15 days), when the mini-Budget had an unprecedented impact on mortgage rates.

First-time buyers suffer most 

The total number of mortgage deals also shrank month-on-month in March, down by 1,283 on the month before – a reduction of about 17 per cent. The current pool of 6,201 options is at its lowest count in two years.

The largest proportion of deals that were pulled were aimed at buyers with smaller deposits, as these are a riskier lending prospect for banks.  

Rachel Springall, finance expert at Moneyfacts says the pulling and re-pricing of mortgage deals had been particularly brutal for first-time buyers. 

‘The unrest in the Middle East caused mortgage mayhem, with lenders rushing to pull products from sale and reprice at higher rates throughout March.

‘Unfortunately, this has led to a drop of almost 400 options for borrowers with just a 5 per cent or 10 per cent deposit or equity, awful news for first-time buyers. 

‘The market overall has experienced the worst upheaval to mortgage choice since the mini-Budget, yet another blow for borrowers over the past five years, which includes the surge in interest rates during the summer of 2023 amid higher inflation expectations.’

What’s happening to rates?

Mortgage rates have risen by more than 1 percentage point since the start of the war in Iran. 

Average two-year fixed rates were 4.83 per cent at the start of March. They are now 106 basis points higher at 5.89 per cent today.

On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,150 a month and £1,275 a month.

Average five-year fixes have risen from 4.95 per cent at the start of March and are 82 bps higher at 5.77 per cent today.

Borrowers can get deals cheaper than these averages, especially if they have a larger deposit of 40 per cent or more.  

The lowest two-year fixed rate deals have gone from around 3.5 per cent in February to around 4.75 per cent in a matter of weeks. 

Rate rises have calmed somewhat in the last week. The average two-year and five-year rates remained unchanged and there was almost no movement among the best deals on the market.

Omer Mehmet, managing director at mortgage broker Trinity Finance based in Welling, Kent said: ‘It’s hard to recall a time when the mortgage market has changed direction so quickly and to such extremes.

‘The eight-day shelf-life shows that lenders, like the rest of us, have little idea of what could happen next. Markets hate uncertainty and borrowers are now having to pay for that fact.’

Borrowers are being advised to seek the help of a mortgage broker to keep on top of a fast-moving market, and to have their paperwork in order so they can move quickly to submit an application when they find the right deal. 

Justin Moy, managing director at Chelmsford-based EHF Mortgages says borrowers need to ‘act quickly and decisively’

He added: ‘Many lenders are repricing two or three times a week. Brokers can work at speed if clients are document-ready and seek help.’